STA Law Firm https://www.stalawfirm.com/en.htmlSTA Law Firm - Court Uncourt (Blog) - Egypt LawsenCopyright 2024 STA Law Firm All Rights Reserved<![CDATA[Evolution of Fintech in the Middle East]]> Evolution of Fintech in the Middle East

"The major winners will be the financial services companies that embrace technology."

With a population of about 600 million people, the Middle East is one of the world's most diverse areas, covering three continents and 21 countries. It is a culturally, politically, and economically diversified region that includes the Gulf Coordination Council's six Arab members. This culture is showcased in the FinTech sectors' various stages of development across the area. Beginning in 2017, Gulf area officials and regulators began establishing forward-thinking and flexible FinTech policies. Since then, there has been a significant attempt to create more diversified, competitive, and inventive economies.  The financial sector is a critical component of the major effort to transition Gulf countries away from a strong dependence on government spending and the energy industry and toward economies fueled by diversified private-sector investments, which have lower volatility and more sustainability. Indeed, promoting robust FinTech ecosystems is seen as a key component of the Gulf Cooperation Council's economic diversification strategy. Fintech is driven by tech innovation that improves existing financial services while also providing avenues for unbanked groups to access financial services in the Middle East.

Government backing, technological advancements, and high smartphone penetration have aided the growth of start-ups in the Middle East, particularly in the Gulf Cooperation Council (GCC). From a regulatory standpoint, regulatory environments in the UAE and Bahrain have hastened the growth of Middle Eastern startups by allowing for a bespoke, firm-specific licensing system for a limited testing time. Governments can also use these sandboxes to learn about emerging technology and modify policies accordingly. The Dubai International Financial Centre (DIFC), the Abu Dhabi Global Market (ADGM), and Bahrain are the three sandboxes operating in the Middle East. E-commerce and electronic signatures are recognized across the Middle East, with more recent e-commerce statutes encompassing electronic payments in some regimes, such as Kuwait. The article majorly talks about the evolution of the fintech market in the UAE, Egypt, Qatar, Saudi, Oman, and Bahrain.

UAE

Without question, the UAE is the most advanced in its FinTech path and the most internationally competitive country in the Middle East and North Africa.

"By providing FinTechs in the UAE with a holistic, dynamic ecosystem that includes an independent regulatory framework, an English Common Law judicial system, and world's economic exchange, start-ups will be better positioned to pitch investors on their innovative solutions and expansion ambitions." - Arif Amiri, Dubai International Financial Centre's top executive. The UAE is now the globe's 25th most competitive nation, up to two places last year. Significant increases in ICT use and skills - perhaps the most crucial engines of FinTech growth potential - helped it gain traction. These elements, according to the WEF, "supplement the UAE's long-standing competitive advantages, namely one stable macroeconomic climate, a robust product market, and well-developed facilities."

After a steep 6.1 percent drop in 2021, the UAE economy could not return to pre-pandemic levels in 2021, with a growth forecast at 4% in 2021. The sluggish rebound, according to Fitch, is due to relatively strict fiscal stimulus and a slow global economic recovery, both of which are expected to impact internal and international demand.        

Corporations founded in free zones, namely the ADGM and the DIFC, should still be licensed in the jurisdictions where their goods/services will be offered. At this time, the free zones do not issue passports to residents of other countries. This means that fintech entrepreneurs will still have to navigate several different rules prescribed by the UAE Central Bank for traditional banking and financing activities, the Emirates Securities and Commodities Authority (SCA) for securities and investment activities, and the UAE Insurance Authority for insurance activities, all of which are 'onshore' in the UAE (including insurance-based investment contracts commonly sold by IFAs in the UAE).

Bahrain

Bahrain's GDP was also hampered by fiscal restraints, with the growth of only 2.7 percent, which was expected in 2021, up from a 4.2 percent decrease in 2020. According to Fitch, Bahrain's fiscal position was by far the weakest in the GCC, and reduced oil prices will hasten Bahrain's budgetary reforms. On the other hand, the Bahraini government has a long-term economic strategy, dubbed Economic Vision 2030, to move away from an enormous public sector and toward a private-sector-led economy.

As per the Milken Institute, Bahrain has the most established financial hub in the GCC, with almost 400 regulated financial institutions. It claims that, unlike the UAE, Bahrain has adopted a national strategy to FinTech advancement, with the Central Bank of Bahrain regulating the finance sector and its Governor, Rasheed Mohammed Al Maraj, pushing Bahrain as a regional FinTech powerhouse with an innovative attitude.

Qatar

Qatar is predicted to muddle over the next few years, as it expanded by 3.1 percent in 2021 after declining by 2.2 percent in 2020. Non-oil activities will benefit from companies' growth ambitions in the run-up to the FIFA World Cup in 2022, which should result in a temporary increase in tourist visits. The impending passage of important FinTech laws, according to KPMG, will "significantly assist the build-up" of the banking services ecosystem. It is related to the formation of the FinTech Division, the Fintech Regulatory Sandbox, and the Qatar FinTech Hub by the Qatar Central Bank (QFTH).

Egypt

Egypt sees an increase in fintech businesses, owing to the Egyptian government and the Central Bank of Egypt's (CBE) desire to modernize payment methods and transition to a cashless economy. Payment services, mobile cash, and smart wallets are the most developed sectors. The Egyptian government and the Central Bank of Egypt collaborate effectively with ministries and other government agencies to create and promote fintech organizations to combine into the financial system.

Legislation signed by the President established the National Council for Payment. The President, the head of the CBE, and the director of the Financial Supervisory Authority are among its members. Its mandate is to improve the adoption of cashless payment systems. An e-commerce law is being debated, and a surge of financial regulatory reform is expected to be enacted in response to the rise of digital credit lending and fundraising.

Jordan

Jordanian fintech is still in its infancy, although it is steadily rising. Local businesses are putting in place systems to settle invoices online and accept payments via cell phones. However, the Jordanian government is working on digitizing Jordanian money to decrease the consumption of cash in circulation. It is actively encouraging the use of fintech in Jordan's public and private sectors, and it is pressuring governmental and non - governmental enterprises to integrate fintech into their day-to-day operations. Fintech products are being integrated into governmental services and the financial sector by Jordan's Central Bank (CBJ). This opens up numerous potential for fintech businesses to create themselves in the country.

Oman

The Central Bank of Oman (CBO) is developing a comprehensive strategy to encourage the growth and use of financial technology (fintech) services in the Sultanate to launch Oman into a $300 billion worldwide industry by 2025. According to the Executive President of the Central Bank, Oman's fintech strategy has the potential to accelerate the roll-out of new financial and banking instruments, encourage venture capitalism, promote entrepreneurship and job creation, and spur overall economic development.

Saudi Arabia

Saudi Arabia has the macroeconomic potential to become a future fintech center. Saudi Arabia is the MENA region's largest economy, with a large, young population (almost half of whom are under the age of 24) and one of the world's highest smartphone penetration rates (65 percent). It is also generally tolerant of technological advances and creative corporate practices. Saudi Arabia's "Vision 2030" and the National Transformation Program 2020 were launched in 2016 to lay out a roadmap for the Kingdom's development over the following decade. One of the main goals of Vision 2030 and the National Transformation Program 2020 is to diversify Saudi Arabia's economy and lessen its dependency on oil. This strategy is centered on technology.

Conclusion

The ability of humans to accommodate change is at the heart of all technological growth, and fintech is the outcome of one such human trait that stimulates innovation. The financial system is transitioning to an entirely new paradigm that will address everything from digital identification to digital sovereignty. Fintech services, which provide a wide range of financial services, will soon become prevalent in the financial system and fintech start-ups. Fintech, on the other hand, will suffer a reaction if the banking sector is disrupted in any way. Fintech companies' existence has cleared the door for financial inclusion, rendering banking services more convenient.

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Tue, 02 Aug 2022 06:06:00 GMT
<![CDATA[Foreign Direct Investment in Egypt]]> Foreign Direct Investment in Egypt

Egypt Is a party to numerous bilateral investment agreements and multilateral conventions in the world including Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965), Multilateral Investment Guarantee Agency (1965) and Unified Agreement for the Investment of Arab Capital in the Arab States (1980). Egypt is a signatory to the United Nations Conference on Trade and Development (UNCTAD of 1964), and the government of Egypt has accordingly adopted various policies and enacted laws to improve the country's position with foreign investors. Investment in Egypt was earlier governed by the Investment Guarantees and Incentives (Law number 8 of 1997 as amended) which was repealed by Investment Law number 72 of 2017 (Investment Law 2017 or new Law as amended.) The Law was officially published on 31 May 2017 and came into effect on 1 June 2017, the provisions of which shall apply to local and foreign investment in Egypt under the regime of inland investment, investment zones, technological zones, or free zones. Amendments to the Law were issued by Royal Decree Number 2731/2019 and 2732/2019 with the purpose to promote investment climate in Egypt and add new incentives for investment projects. When a natural or legal person (Egyptian or foreigner) invests within the Arab Republic of Egypt by either setting up, expanding or developing an investment project and using the money for the development of such a project while contributing to the sustainable development of the State will be termed as an investor making an investment in Egypt. Such an investment project can include activity in many sectors including industry, agriculture, tourism, communications or technology sectors. The new Law aims to promote foreign investment in Egypt by simplifying the process while improving the national economic growth rate. Employment opportunities, promotion of exports and sustainable development are some of the benefits that are aimed to be promoted through this Law, and great emphasis has been laid out on the social responsibilities of foreign investors in the territory. The competent authorities aim to enhance foreign investment in Egypt, and it shall be governed by the following principles:

  • Promotion of equality of investment opportunities without any discrimination;
  • Supporting emerging companies, whether big or small and empowering small and young investors;
  • Protecting the environment and public health
  • Protection of consumers and prevention of monopoly
  • Encouraging transparency and prudent management
  • Stabilize investment policies
  • Maintain national security and the public good
  • All such principles will apply to both the Investor and the Republic in their respective areas of responsibility.

    Features of the Law

    Some of the principal features of the new Law are listed below:

  • Investment Map – The General Authority of Foreign Investment (GAFI) is a regulatory body in Egypt that is the Authority that will prepare an investment map to identify the different types of investment zones for investment projects. Such an investment map shall lay down the type, regime, sectors, geographic areas, real-estate properties and other activities pursuant to the type of investment regime. Such an investment map shall be reviewed every three years and whenever required by the Authority.
  • Types of Investment Zones – The Prime Minister of Egypt shall designate areas for different activities of investment in different investment zones depending upon the investment activity carried out. Such zones can be divided into inland investment zones, investment zones, technological zones and free zones (public and private).
  • Projects of National Interest- Companies that are undertaking activities pertaining to national or strategic interests of the country shall be able to receive approval for such a project in one single time for the establishment of such a project. Such strategic or national projects include roads, transportation, ports that may be granted one single approval for the establishment and management of the project, and such approval shall be effective immediately without necessitating any other procedure.
  • Investor Service Centre - The Investor Service Centre shall be established in the Authority that shall provide all companies permits and licenses for conducting activities in the investment projects and with all incorporation and post-incorporation services. Investors can obtain all such licenses from this centre and need not contact any other authority. This shall also establish electronic means by which such incorporation activities can be conducted.
  • Safeguards Afforded to Foreign Investors

    The following protection and safeguards are afforded to investors under the Law:

  • The foreign investors within the Republic shall be given fair and just treatment and will receive the same treatment as afforded to Egyptian Nationals under the Law. An exception to grant preferential treatment to investors can be made with the approval of the Council of Ministers.
  • Arbitrary or discriminatory procedure to establish investments is prohibited, and an investment project established on the grounds of fraud, deceit or corruption shall not enjoy any protection under the provisions of this Law. Nationalization of projects is not allowed.
  • The property in investment projects cannot be attached, confiscated or frozen except by a court's order or judgment. The only exception to this will be tax debts and social insurance subscriptions due to the State, which may be collected at any time and through all types of attachment.
  • Proper procedure and a warning must be issued before conducting any revocation or suspension of licenses issued with respect to any investment project in the jurisdiction. The right to be heard and defend with an adequate grace period shall be afforded to the person being accused of any violation.
  • Foreign nationals who are not residents of Egypt shall be provided with residence in the territory throughout the term of the investment project.
  • Such investors are entitled to receive all profits from the project, and if they wish to, then they can even transfer such profits abroad. The investors will also have a right to liquidate the project and transfer the proceeds of such liquidation abroad. They can also transfer any compensation received from the project abroad.
  • An investment project can appoint up to 10 percent foreign employees in a project which can be increased to a maximum of 20 percent foreign employees in case it is not possible to appoint national workers with the required complications. This percentage can further be raised in matters of special significance and after a decision is issued by the Supreme Council for the same.
  • Investors will enjoy general incentives such as an exemption of 2 percent overall customs tax on the value of imported machinery and equipment in Egypt. Stamp tax and registration fees on loan agreements, mortgages, articles of association and land contract notarizations related to the investment shall also be exempted.
  • Special Incentives shall be provided by the Supreme Council's decision by dividing investment areas into two Sectors; Sector A affording a 50 percent discount off the investment costs and Sector B affording a 30 percent discount off the investment costs.
  • Additional incentives for foreign investors can be issued by the head of the General Authority for Investment and Free Zones (GAFI) which may include stabilized utilities, State incurring expenses paid by the Investor, allocation of lands free of charge, allowing special customs offices for exports and imports pertaining to the investment project and other incentives.
  • Social Responsibility of Investors

    The investors have certain responsibilities to adhere to while investing in Egypt. This shall include achieving goals of sustainable development, and the Investor may dedicate a certain percentage (not exceeding 10 percent) of his annual profits, to participate in certain fields in whole or in part and contribute to sustainable activities. Such field of activity includes the following:

  • Protection of the environment is of prime importance, and the investors shall take all necessary action to enhance and safeguard the environment.
  • Investors can provide services or programs in healthcare, social care, cultural care or any other development areas.
  • Support technical education or provide funding for research and studies. Investors may also participate in spreading awareness through campaigns that develop and improve the production in universities or scientific research institutions.
  • Providing training and scientific research.
  • The Competent Minister may create a list of social development activities according to the sectors, geography or other criteria and make an announcement of the list to the public. Investors may not pursue any projects that are religious, political, party-related or involve discrimination among citizens. Social responsibility is imposed on the investors in Egypt and shall be pursued subject to Article 15 of the Law.

    The Investment Regime

    This Article aims to divide and focus on the investment regime in all four areas, including investment in inland regions, investment zones, technological zones and free zones (public and private).

  • Inland Investment
  • Investment set up, established or operated in the mainland of Egypt (zones other than the free zones) in accordance with the national public policy and the provisions of the Law shall be termed as an inland investment. The investment can be made in all areas other than those of investment and free zones. An investment plan shall be drawn up by the Ministry of Investment for approval by the Supreme Investment Council, which shall include the type of investment, geographical area, the system and other sectors. After receiving the plan, the investment authority will issue guidelines for such a project within 90 days of receiving the proposal. Such guidelines shall include the permits, licenses, allocation of land and issuance of other approvals. Companies that are set up for national operations shall be granted approval by the Prime Minister for the management of the project.

  • Investment Zones
  • An investment zone is a geographic area with defined size and borders specified to conduct a specific investment activity and other activities that complement this. An investment zone is set up by virtue of a decree issued by the Prime Minister in fields including agricultural, logistic and industrial zones. Such a decision shall clearly lay out the location, coordinates, nature of the activity, term for completion and shall grant a license for the investment project. The developer in charge of the zone will be responsible for the establishment of the zone pertaining to the license, the failure of which shall render the license void. The investment zone shall be managed by a Board of Directors (BOD) who shall have the sole jurisdiction to manage such a zone. The BOD shall lay down the plan of action and rules for conducting activities in the project. The BOD will also file quarterly reports on any progress or issues relating to the investment project.

  • Technological Zones
  • Technological zones will be established by virtue of a decree issued by the Prime Minister covering areas of communication and technology and by issuing of a license. This field can include industrial activities, technological education, software development and other complimenting activities. All machinery and tools required to conduct activities relating to communication and technology in this zone shall be exempt from all taxes and custom duties. The Board of Directors will have the sole jurisdiction to set out rules and criteria for the management of the project. The BOD will be required to disclose all the funds of the project, which will be subject to audit on an annual basis by an independent entity to avoid conflict. Such a report shall be submitted to the Supreme Council to ensure that there is no violation by such BOD.  

  • Free Zones
  • A free zone is that part of Egypt's territory that will be located within its borders while being governed by administrative Authority and the dealings of which shall be conducted with special customs and tax provisions. There are two types of free zones, public and private. A public free zone shall be set up by the Council of Ministers upon a proposal by the competent Minister. Such public free zones shall be granted a license, and the decision issued will layout the location and boundaries of the free zone. Public free zones in Egypt will mainly aim at the exportation of goods and services abroad and shall be managed by a BOD. Similarly, a private free zone can also be set up a proposal of the competent Minister pending the approval of the council of ministers and shall be restricted to one or more similar activities in nature. The free zones can be set up in all investment sectors but shall not be issued licenses to conduct projects in areas of oil processing, fertilizer industries, iron and steel, natural gas, transport, liquidation, energy heavy industries, alcoholic beverages, guns, ammunition, explosives industries and other industries associated with the national security of Egypt. This shall be done without prejudice to the provisions of the licensing of oil refining projects (Law Number 133 of 2010) and companies that are granted licenses to operate in the free zones under this Law. All investment projects in this zone shall be subject to customs and tax controls in accordance with the Egyptian customs administration tax authority. Areas covering banking, non-banking financial instruments and monetary systems shall be carried out in the free zone areas after receiving approval and licenses issued by the chairman of the BOD of the zone. A 1 percent fee of aggregate income is required for any project not involved in importation or exportation of goods in the public free zone, whereas, a fee of 2 percent of total revenues in relation to other projects except importation and exportation shall be required in the private free zones. With respect to both the private and public free zones, the investment projects shall be required to pay a 1 percent fee of the total revenues upon exporting goods abroad and a fee of 2 percent of total revenues upon imported products into the country (transit goods exempted from this fee). An annual fee not exceeding 0.001 percent of the capital, at a maximum of 100,000 Egyptian pounds shall be paid in the equivalent currency specified by the competent Minister in both the zones.

    Amendments to the Law

    Pursuant to the executive regulations of the Law, amendments to the Law by virtue of Decree Number 2731 of 2019, local and private entities are required to submit information and data to record the foreign direct investment in Egypt as well as any indirect investment to the General Authority of Foreign Investment (GAFI). Public bodies have been identified as public authorities, ministries, governorates and other legal persons competent to grant the necessary license to companies to establish activities in accordance with social laws and international agreements. Some of the public bodies included but not limited to are the ministry of petroleum, ministry of electricity and renewable energy, the Central Bank of Egypt, Egyptian exchange and special economic zones. Earlier all companies set up under the Law were required to submit only annual reports of the financial statements of the company to the GAFI. Whereas, under the amendment, quarterly reports according to the new data reporting requirements shall also be submitted to the GAFI by all companies having foreign investment in Egypt. Such quarterly reports shall be submitted within a maximum of 45 days from the end of each relevant quarter and annual reports within four months from the end of every financial year shall also be submitted. The failure to comply with this shall result in a penalty not exceeding 50,000 Egyptian pounds to be imposed on the person in charge of the management of the company, provided that he was aware of such non-compliance.

    Dispute Resolution

    The disputes arising in relation to investment projects can be amicably settled under the Law by virtue of dispute resolution, and other amicable ways including arbitration, mediation and negotiations and are listed below:

  • Ministerial Committee for Investment Dispute Resolution – A committee for investment dispute called the 'Ministerial Committee on Investment Dispute Resolution' issued by a decree of the Prime Minister, shall tackle disputes arising between investors and the State in relation to any investment projects that are submitted thereto.
  • Grievance Committee – A grievance committee/committees shall be established to examine any complaints against the resolutions passed by the authorities in accordance with issuance of approvals, permits or licenses in the investment projects. A judge from the judicial body shall form and chair such a committee. An aggrieved party can submit complaints to the committee within 15 days from the date of notice or knowledge of decision rendered against such an aggrieved party. The committee shall be entitled to contact the parties in question and request for documentation or clarifications as the case may be. It shall settle such a matter within a maximum period of 30 days from the date of closing of hearings and submissions in the matter. 
  • Ministerial Committee on Investment Contracts Disputes – A committee called the 'Ministerial Committee on Investment Contracts Dispute Resolution' shall be formed by virtue of a decree issued by the Prime Minister to settle disputes arising from investment contracts with the state or such authorities being a party. The settlement decision by such a committee after being approved by the council of ministers shall be binding and enforceable.
  • Mediation and Arbitration Centre – The parties of a dispute can agree to settle such a dispute at any time through settlement by arbitration or mediation or any other means of dispute resolution. The Egyptian Arbitration and Mediation Centre with a seat in Cairo shall be set up to tackle the settlement of investment disputes arising among investors or investors and the State if such parties agree to settlement through arbitration or mediation before this Centre. Members comprising a board of directors who have the experience, reputation and specialization shall be appointed by virtue of a decree issued by the Prime Minister.
  •  

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    Fri, 11 Feb 2022 06:08:00 GMT
    <![CDATA[Economic and Fraud Provisions in the Middle East]]> Economic and Fraud Provisions in the Middle East

    "There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

    - Milton Friedman

    Economic fraud is a term that has been repeated over the years, so much so that the consequences it bears do not have any precedence or impact on the ones that hear it. For many companies and capitalist machinery, this term essentially triggers them to explore options to hide their fraudulent tracks and continue operating in the same manner. To have governments help them cover the tracks in certain jurisdictions ultimately defeats the purpose of the assignment.

    Despite the incongruent activities of individuals, companies, and governments from the expected norm of justice in many jurisdictions, other countries are tenacious to implement a regulatory framework that will eradicate such fraudulent activities in the market. This article will discuss the economic and fraud provisions established in the Middle East, their effectiveness, and the scope of reach it possesses about financial crime.

    What are the Economic and Fraud provisions in the Middle East?

    If one area of the economy has seen a steady increase in the past years, it would be the economic fraud prevalent in society. Regardless of the number of provisions that jurisdictions and international organizations establish to combat financial fraud, none of them seems sufficient. The parties involved in economic fraud and other fraudulent practices are constantly evolving to cover their tracks efficiently.

    Infamous scandals like Bernie Madoff and the Ponzi scheme leave one in absolute awe as it remains unclear, what is the culprit: the crime or the criminal? Many innocent parties, including employees and clients, were adversely affected by the ill-doings of these financial schemes. After the outburst of many scandals and its impact on many innocent individuals, jurisdictions are trying to fasten their pace to stay a step ahead of wrongdoers and hopefully eliminate the potential threats in the market.

    The introduction of new anti-economic fraud regulations has paved the way for potential investors to feel a sense of security over their investments within the market, along with the ability of the regulations to enforce justice. Over time, people have understood that the formation and establishment of an anti-fraud legal framework are not sufficient to ensure peace and harmony in the market, an iron fist must be imposed on fraudulent parties and companies to deter them from doing such activities in the future and serving it as a lesson for other participants in the market who bear similar intentions.

    The types of economic fraud can be quite varied and are spread across different industries and the scope of nature. These could include housing benefit fraud, tenancy fraud, council tax fraud, blue badge fraud, social care fraud, business rates fraud, insurance fraud, bribery, and money laundering. These are just a top layer of economic crimes prevalent in an ocean of fraudulent activities in the market. The crimes that are more coherent to the wrongdoings in the market include not declaring the business location, stating that a property is not in use while it is, dishonestly requesting for an exemption to pay for charges that are owed, or any unauthorized movement of money to make ill-gains.

    Often, economic crime is caused not by companies but by customers towards companies. The highest reported crime boost in the Middle East is through customer fraud and procurement fraud, which have proved to be the most disruptive fraud within an economic crime. In a survey conducted on a global platform, the number of customer frauds was comparatively more in the Middle Eastern region.

    In an ongoing effort to combat fraud together, many companies in the Middle East began investing in more stringent controls and implementation of the rules to avoid economic crime, while many others conducted a thorough examination into reasons after the occurrence of a crime in the company. Another issue that stands alongside customer fraud about its prominence is procurement fraud. This fraud entails the practice of favoring associates with vendor and supplier contracts.

    All these efforts are measures taken to mitigate the risks involved and ensure that proper prevention is taken by instilling the right technology and talent to deviate from any fraudulent prone routes.

    However, it is not easy to ensure that accountability will be maintained and transparent feedback is provided. Another limitation of this procedure is that advanced technologies to combat financial crime can be costly, which would further deplete if the company possesses insufficient resources to acquire and install the platform and is not equipped with properly trained employees to manage the technology. The lack of proper expertise to handle the in-place technology could attract various cyber threats, which allows a wrongdoer from any part of the world to infiltrate the company's system.

    With this in mind, companies must equip themselves from the arsenal of defenses to protect themself and the financial and reputational facets of the company. The extent of damage that infiltration of the company's system can cause to the operations is quite unfathomable. It would be better for companies to leave their vault of secrets wide open than installing an IT platform that is managed poorly. The necessity of combating such insecurities is proliferating and must be countered at the earliest. One would like to believe that the efforts of the legal jurisdictions in the Middle East to battle economic crime are practical and promptly applied. However, many of the jurisdictions still fail to provide a proper implementation of the provisions established against economic crime.

    The readiness of companies in the Middle East to confront the indecisive nature of economic crime and report any issues as they arise is still moving at a stagnant rate. The stark increase in cyberattacks and its potential threats is not a mystery to the companies in these regions. Nevertheless, they decide against preparing themselves in defense of such risks and attacks. The firms in the region and the governmental organizations must understand the types of threats that could arise in the economy and the nature of such economic crimes. Although this would seem like an insignificant step, this particular action could help achieve a more profound revelation of the gaps and vulnerabilities of the economy and its protective framework.

    Many would argue that the relationship of the Middle East with economic crime and fraud dates back ages. All the glitz and glamour and the boom of economies are incongruent with the fraudulent activities occurring within the firms and regions. A region's legal systems cannot enforce the regulatory frameworks established to fight against economic crime if the country's government does not implement the rulings.

    To know more about Economic and Fraud Provisions in the Middle East in Singapore Click here 

     

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    Mon, 27 Dec 2021 03:22:00 GMT
    <![CDATA[Transfer Pricing Regulations in the Middle East]]> Transfer Pricing Regulations in the Middle East

    The Transfer Pricing is a common mechanism which the countries use to transfer the tax base. The transfer is often from countries with high taxation to countries with low taxation. Transfer Pricing deprives states of their fair share of taxes from global corporations. In the case of Transfer Pricing, countries are competing for the presence of multinationals by adopting ways to make their jurisdiction more attractive. One such adopted way is by decreasing its corporation tax. No doubt that the Transfer Pricing legislation has been in Europe and North America for around 50 years, but the Middle Eastern countries are newcomers in this field. 

     In the European Union, many public authorities introduced Transfer Pricing Regulations; however, the effectiveness of these regulations has been in question. Some consider the regulations as a contributory factor to the increasing complexity of tax laws and an additional cost for companies. The common consolidated corporate tax base was primarily introduced to solve the Transfer Pricing problem in the European Union.

    Middle Eastern countries have witnessed significant developments in the taxation sector. The Middle East was popular for relying heavily on the Oil and Gas sector to contribute to its national revenues. However, seeing a decrease in the energy prices which lowered the total revenue by about 60 percent between 2012 and 2016, many countries introduced Value Added Tax in 2018. The Middle East also signed up to international Transfer Pricing recommendations from the Organization for Economic Cooperation and Development, as an attempt to counter the erosion of national revenue and further minimize capital flight.

    Kingdom of Saudi Arabia

    The Kingdom of Saudi Arabia (KSA) introduced its Transfer Pricing legislation in December 2018, with its final roll-out in February 2019. The KSA's General Authority for Zakat and Income Tax introduced reforms, where companies operating in the KSA must comply with the 3-tiered documentation required by Article 13 (covering transfer pricing documentation and country by country reporting (CbCR)). Firms must supply the following:

  • Master file; 
  • Local file- containing additional information required by the OECD, such as industry analysis; and  
  • CbC report. 
  • The companies are also required to submit a Transfer Pricing disclosure, providing details on enclosed transactions and Transfer Pricing policy. These requirements are as per the recommendations of OECD. 

    The KSA framework introduces four minimum standards for business to follow.

  • Article 5 covers harmful tax practices;
  • Article 6 covers treaty abuses;
  • Article 13 covers transfer pricing documentation and country by country reporting (CbCR); and
  • Article 14 - covers dispute resolution.
  • In 2019, Bahrain, Egypt, Qatar and the United Arab Emirates also introduced new Transfer Pricing regulations. Bahrain and Oman are expected to introduce new transfer pricing regulations as well.

    The increased focus on Transfer Pricing by the Middle Eastern countries is a result of compliance with commitments on tax

    cooperation. Many jurisdictions in the Middle East continue to commit to the OECD's Inclusive Framework for the implementation of minimum standards. 

    Recent changes to the Transfer Pricing requirements: 

    United Arab Emirates

    The UAE Cabinet issued the Cabinet of Ministers Resolution Number 31 of 2019 concerning economic substance regulations in the UAE on 30 April 2019. The Regulations require the UAE entities ("Relevant Entities") that carry out any of the activities listed as "Relevant Activities" in the Regulations to have demonstrable economic substance in the UAE from 30 April 2019. In addition, CbC reporting is required for MNEs with consolidated group revenue of a minimum of USD 860 million. MNEs must notify the UAE government of the CbC filer's tax residency. The entities subject to the economic substance regulations must file an annual notification declaring the business and activities being performed and if the economic substance test is being met.

    The Regulations were introduced to honor the UAE's commitment as a member of the Organization for Economic Cooperation and Development Inclusive Framework on Base Erosion and Profit Shifting and in response to European Union's review of the UAE tax framework. The Regulations ensure that the Relevant Entities undertaking Relevant Activities are not being used to artificially inflate profits that are not in commensuration with the economic activity undertaken in the UAE. The objective of the Regulations is to determine the requirements and set out the standard to confirm that the Licensee carries out the activity in the State that achieves economic substance interest. 

    The Regulations came into force on 30 April 2019, guidance on the Regulations was issued on 11 September 2019, the Regulatory Authorities were identified in a Ministerial Resolution issued on 4 September 2019 and amendments were made to the Regulations in Cabinet Decree Number 7 of 2020 issued on 19 January 2020 (the "2020 Regulations"). As per the 2020 Regulations the provisions of the Regulations do not apply to any commercial company, as defined in Article 8 of Federal Law Number 2 of 2015 concerning Commercial Companies, as amended, in which the Federal Government, the Government of any Emirate of the State, any Government Authority or entity affiliated to either of them owns directly or indirectly at least fifty-one percent (51%) of the share capital. The Regulations apply to a licensee carrying out Relevant Activities. Under the Regulations, "Relevant Activities" are:  

  • Banking  
  • Insurance  
  • Fund management  
  • Lease-finance  
  • Headquarters  
  • Shipping  
  • Holding company  
  • Intellectual property (IP)  
  • Distribution and Service Centre 
  • The Relevant Entity must comply with the economic substance requirements by: 

  • Conducting the core income-generating activities in the UAE;  
  • Being "directed and managed" in the UAE; and  
  • Considering the level of activities performed in the UAE:  
  • Having an adequate number of qualified full-time employees in the UAE  

  • Incurring an adequate amount of operating expenditure in the UAE  

  • Having adequate physical assets in the UAE.  

  •   A Relevant Entity which only undertakes a Holding Company Business will be subject to less stringent economic substance requirements. However, if a Relevant Entity carries out high-risk IP related activities, additional requirements shall apply. It is mandatory that the economic substance requirements be met for each of the Relevant Activities in case a Relevant Entity is carrying out more than one Relevant Activity. 

    The penalty for failure to demonstrate sufficient economic substance in the UAE or to notify or to provide accurate or complete information or for the relevant Financial Year ranges from AED10,000 - AED50,000. 

    Bahrain 

    Bahrain's rules, effective from January 2019, require profits generated by the companies of Bahrain to comply with the actual economic activity in Bahrain. The new rules protect situations where the Bahrain entities accrue profits concerning the attribution of specific functions; albeit, in reality, it does not have the required level of substance for managing and controlling such functions. The entities that fall under the definition of "Relevant Entities" are subject to the rules and are required to file an annual Economic Substance Report within a period of three months from the end of the financial year. 

    Egypt 

    Egypt, similar to the KSA, introduced master file and local file documentation requirements, effective from January 2019. The rules apply to tax years beginning on or after 1 January 2018. However, there is no minimum threshold for the preparation of a master file and local file. A CbC report is also required for MNEs with consolidated group revenue of a minimum of USD 190 million. 

    Oman 

    There are currently no specific Transfer Pricing documentation requirements; however, Oman has also joined the OECD's Inclusive Framework for the implementation of minimum standards. As a result, Oman may introduce its CbC reporting requirements accordingly.

    Turkey 

    On 25 February 2020, Turkey adopted the three-tiered transfer pricing documentation, including the preparation of a master file, local file and CbC report. A master file is required for MNEs with assets and revenues of a minimum of USD 75 million. A local file is a requirement for all entities with related-party cross-border transactions. Companies with revenues and assets of a minimum of USD 15 million USD must submit a detailed form on related parties and intercompany transactions. CbC reporting is required for MNEs with consolidated group revenue of a minimum of USD 820 million.

    Qatar 

    At the end of 2019, Qatar also published its Executive Regulations to the Income Tax Law introducing Transfer Pricing documentation requirements for tax years ending on or after 31 December 2019. Along with the master file and local file requirements, which supplement the CbC reporting requirements that have been in effect since 2018, the new rules also require a Transfer Pricing questionnaire to be submitted with the annual tax return. The threshold for preparation of a CbC report is USD 825 million. 

    Conclusion

    With the adoption of Transfer Pricing regulations, the GCC authorities signing the Base Erosion and Profit Shifting Inclusive Framework and further having committed to applying four minimum standards, Transfer Pricing in the Middle East shall permit and regulate the Pricing Transactions internally within businesses as well as between companies which operate under common control or ownership, including cross border transactions. The MNEs having their operations in the Middle East must carefully take the changes to the Transfer Pricing documentation requirements and their deadlines into consideration. The Middle Eastern countries require the preparation of Transfer Pricing documentation in compliance with the Organization for Economic Co-operation and Development's base erosion and profit shifting initiative. The Middle Eastern countries in the region did not previously have Transfer Pricing documentation requirements. The documentation obligations have increased by adding the preparation of documentation that is consistent with the OECD's three-tiered approach.

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    Fri, 27 Aug 2021 12:00:00 GMT
    <![CDATA[Initial Public Offering- Egypt]]> Initial Public Offering - Egypt

    Introduction

    The Egyptian Stock Exchange (EGX) is the registered securities exchange that handles all of the stocks to be traded in Egypt. EGX comprises of two exchanges:

    • Cairo Stock Exchange
    • Alexandria Stock Exchange

    A merger in 2007 of the two exchanges resulted in the birth of EGX. The Egypt Government established The Egyptian Financial Supervisory Authority (EFSA), replacing The Capital Market Authority (CMA), The Insurance Supervisory Authority and The Mortgage Finance Authority.

    In 2017, the EFSA was reestablished as the Financial Regulatory Authority (FRA). The FRA is responsible for all financial transactions excluding banking related transactions, and markets. All financial transactions in relation to banking related transactions and markets are regulated by the Central Bank of Egypt.            

    Laws Applicable

    • The CM Law (Capital Markets Law No. 95 of 1992 and its Executive Regulations) which regulates the EGX and includes certain eligibility criteria and disclosure obligations in relation to the contents of the offer document
    • The Listing Rules (Decree of the CMA's Board of Directors No. 30, which concerns itself with the listing and de-listing of securities on the EGX and all ongoing obligations once listed.
    • The Companies Law, specifically Company Law No. 159 of 1981 and its Executive Regulations which regulates incorporation and management of all entities incorporated in Egypt.

    IPO Registration Requirements

    Due to the extensive nature of IPO process worldwide, it is important to approach the regulators as early on as possible to ensure a smooth process with as little obstacles as possible. This also provides the company with further time to provide for any clarifications required by the Authority, if needed.

    • Licenses from the regulatory body are compulsory. Underwriters need to be licensed by the EFSA under its rules and regulations.
    • A minimum issued capital of LE 1,000,000 is required for a company to enter the IPO process, along with the authorized capital to be less than five times the issued capital.
    • According to the CMA Laws, the founders must obtain a minimum of fifty percent of the shares available.
    • Furthermore, Egyptian law recognizes a difference between retail and institutional offers and this makes it a market that allows for more specific action to be taken by the parties to market their commodities as such.
    • A company is required to inform the Authorities in regards to initiation of issuing of securities, and can start within 3 weeks of informing, provided no objections have been raised by the Authority.
    • Semi-annual activity Report and Progress Report to be provided.
    • Offering of shares shall be unconditional and immediate with no deference to a term.
    • The main difference between a retail offer and an institutional offer is that a retail offer will require a prospectus to be prepared and approved by the EFSA, whereas an institutional offer will not.
    • It is required that the corporate entity appoint investment bankers/licensed underwriters, solicitors, auditors and financial advisors

    Since registering for IPO is a complicated process, it is advisable to appoint aforementioned professionals as they will help you smooth out the process of registering. Underwriters set the price for IPO offering and hence is a crucial aspect of the process.

    Retail Offer

    A retail offer, as with most jurisdictions, is a public offer of securities. The main practical difference between a retail offer and an institutional offer is that a retail offer will require a prospectus to be prepared and approved by the EFSA whereas an institutional offer will not.

    The documents required in the case of a Public Offering:

  • A public subscription approved by EFSA
  • A Prospectus
  • The shareholders' resolution with special majority
  • Fair value report issued by the financial adviser
  • Prospectus

    The Prospectus at incorporation have to disclose various details as specified for in the CML. These are:

    • Name, Legal form of the Company.
    • Purpose and Duration of the Company.
    • Date of the initial contract.
    • Date of beginning and end of fiscal year.
    • Issued and paid up capital

    The information to be enclosed in the Prospectus is not limited to the abovementioned. The extensive list of details required by the CML.

    This Prospectus is required to be filed with and certified by the Authority and published in two popular daily morning papers, of which at least one should be an Arabic newspaper. As an extremely crucial document, a company cannot introduce IPO or start the process without the establishment of a Prospectus.

    Institutional Offer    

    An institutional offer may also be referred to as a Private Offer, only qualified investors are eligible to invest in such securities, the criteria for qualifying as investor herein in may depend on certain aspects like financial capability and experience in the securities market.

    Further, certain requirements with respect to eligibility hereunder for natural persons and qualified investors.

    Listing Rules

    After the completion of the IPO procedures, the Company is required to adhere to the Listing rules of EGX. To be listed on the Official list, the Company is required to have:

    • At least 2 million Shares
    • At least 100 shareholders
    • An issued Capital of at least 20 Million EGP
    • Primary and Secondary Share Offering amounting to not less than 10% of total issued shares
    • 5% or more of the company shares to be free floating percentage 
    • Net Profit, excluding taxes for the previous fiscal year shall not be less than 5% of the paid in capital
    • Shares deposited with the Central Depository System
    • An accredited Auditor as per EFSA
    • If it is issued by the Government and offered to the public.

    Further, in case the shareholders drop below 200 in a span of 3 months during the fiscal year, the shares can be subject to being de-listed and non- official list of the stock exchange. This non- official list may also contain foreign securities.

    Further, the listing committee is responsible for revision, verification and approval of application, they need to also make sure that these adhere to the CMA Law.

    A company may not offer securities in more than one place of exchange, unless it is with the Cairo and Alexandria Stock Exchange. In this case, the securities listed shall be on both with a single listing fee which shall be divided between both these exchanges.

    To know more about Initial Public Offering – Egypt Click here 

     

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    Wed, 24 Mar 2021 04:43:00 GMT
    <![CDATA[Artificial Intelligence and The Criminal Justice System]]> Artificial Intelligence & The Criminal Justice System

    Introduction 

    As Stephen Hawking once said, "Artificial Intelligence is either the best or the worst thing to happen to humanity." The fact that the system is constantly evolving and learning from our routine behavior allows it to adapt and become a sophisticated technology that has the potential to replace several mundane tasks that are being done by humans today. For instance, many tech-savvy organizations are using Artificial Intelligence (AI) to carry out repetitive administrative tasks such as HR, IT, Marketing etc. while this move is fruitful for the company in terms of reduced human labor and increased efficiency, it is detrimental to humans with the relevant skills being replaced by such systems. The point here being, there are various pros and cons of using artificial intelligence in every field. 

    From Terminator to Robocop, the idea of crime-fighting robots has been embedded in our minds, and its practical application would just be so profound. With the advent of AI in our daily lives, what seemed like a futuristic thought is now coming to life. The criminal justice system is increasingly turning to Artificial intelligence to elevate their law enforcement agencies and officers. The most popular use of artificial intelligence is in identifying traffic and safety violations and enforcing rules and regulations thereof; it also helps in identifying repeat offenders in that respect. Apart from using AI for identifying traffic violations, this system is also used for investigative purposes, which entails, surveillance, facial recognition etc. 

    One such case of success of AI in law enforcement was seen in China, wherein, a suspect was caught by police officials at a pop concert containing around 60,000 people. His attempts to blend in with the crowd failed and was taken by surprise as he was identified at the ticket counter by a facial recognition system. 

    The primary goal of law enforcement may be realized by intelligent systems that assure safety and security, further working towards solving and deterring crime. With the rise of artificial intelligence, police officers all over the world are relying on this technology to facilitate police work; however, artificial intelligence though beneficial, must be kept in check considering the risks that come along with it. 

    This article focuses on both the positive and the negative impact that AI may have on the criminal justice system. 

    Advantages of Use 

    The ability of a machine to respond to its external environment without human intervention is a feat in itself. This facet of human intelligence that is inculcated by the artificial intelligence system will serve highly advantageous and allow AI to be integrated permanently in our criminal justice system.

    Minimizes threat to life

    Despite AI being in its primitive stages of use in many countries in the world, it does have the potential of becoming an integral part of maintaining public safety. In case of high profile and dangerous cases, wherein the suspect is armed with a weapon, there is an impending threat to human life, however, using AI in such cases can ensure that this threat is minimized, if not completely eradicated. 

    Video and imaging analysis

    It is mammalian nature to feel tired and fatigued. This nature, therefore, sets us apart from artificial intelligence, in the sense that, while examining large amounts of video or image data there is a high possibility of error that can be prevented by the use of machines. Further, the adaptive feature of AI allows it to distinguish between facial features and behavior once an algorithm with that respect is fed into the system. For example, this AI system would be specifically useful in identifying a repeat offender in case of theft and robbery. 

    Not only does AI reduce and eliminate errors, but it also improves data collection in terms of speed, quality and specificity.  

    Further, along with analyzing videos and images, AI can also analyze sounds. For instance, if a gunshot is fired, depending on the quality of the sound, AI may be able to specifically point out the exact weapon used and estimate the caliber of the bullet fired. 

    This basically then allows the police officials to respond to the scene of the crime faster. 

    Forensic Analysis 

    Another aspect of law enforcement is the one associated with the collection and analysis of evidence. In many cases of violent crimes, especially before the development of advanced DNA collection and analysis techniques, it was very difficult to get a perfect match on the evidence collected by reason of it being too minuscule, tarnished or unviable. The challenges that such collection of evidence poses can be addressed by AI, in the sense that, sensitivity to data collection and processing of large amounts of complex data can be expedited. Along with collection and analysis of evidence, AI can also allow the creation of advanced systems for conducting an autopsy and determine the cause of death with ease. 

    Predictive Analysis

    In the law enforcement profession, police officers, investigators etc. spend years and years gaining expertise, only then are they able to anticipate the commission of a crime. However, AI in this department would facilitate in forecasting a crime based on the behavior of an individual within the environment under surveillance. Its adaptive nature can also help in predicting whether or not a criminal would revert to his criminal past or be reformed after serving a sentence. This predictive analysis system can help curb terrorist activities, transportation of illegal goods and human trafficking activities, among many others. 

    Accuracy of Judicial Decisions 

    In the case of pronouncement of judicial decisions, the predictive nature of AI may come in handy. The fact that AI can assess the risks involved with the alleged offender with respect to criminal recidivism and appearance in court may allow judges to impose stricter conditions or even relax release conditions. This system would work by analyzing, the number of offenses, the number of times the offender has committed the same offense and the number of times that he has failed to appear in court. 

    Associated Risks of Use 

    Artificial intelligence comes with its fair share of risks; it is more or less a double-edged sword. On the one hand, it facilitates ease of access to the law enforcement department; on the other hand, it allows criminals to fashion new ways of committing crimes. 

    Criminals are no strangers to technology, from the exploitation of cryptocurrencies to hacking into GPS and mobile systems. With growth and development in artificial intelligence, threats to internal and external security also increases. Therefore, law enforcement must be well- equipped in order to curb the challenges that such technology poses.

    The United Nations Interregional Crime and Justice Research Institute identified three basic dangers associated with artificial intelligence; physical attacks, digital attacks and political attacks. 

    Physical attacks are those that are associated with data poisoning, smuggling contraband through the use of drones and using armed drones that use face recognition to physically attack the target. 

    Digital attacks can range from data phishing and exploiting security systems and vulnerable online data. 

    Political Attacks are associated with infiltrating media and news portals to spread fake news which would potentially cause conflict. Moreover, political attacks on political figures by way of manipulating audio and video material that can cause detriment to the reputation of the political figure before the public.  

    A major threat is also associated with the use of arms and weapons. The fact that AI can be used to create smart weapons of mass destruction for criminal and terrorist activities is a big threat to the safety and security at a global level. An instance of the use of AI for terrorist activities was seen in the case of a planned attack on the Japanese Prime Minister, wherein, a drone was sent by the Islamic State of Iraq and Levant (ISIL), set to land on the roof of his office with an aerial unmanned explosive device.

    Further, it is also important to note that AI is merely a machine that has been fed an algorithm; therefore, it is objective in nature. To clearly analyze the possibility of an offender reverting to crime, a subjective view needs to be taken; hence, with respect to predictive analysis in case of a court hearing or otherwise, it can lead to discrimination in the criminal justice system. 

    Artificial Intelligence in the UAE

    The UAE has, since time immemorial, been constantly adapting and using the latest technologies in all aspects of life, to the point where it is now considered to be a technological hub. To further this reputation, the UAE has come up with a roadmap to integrate artificial intelligence into the economic and government system to promote growth and opportunities. 

    A national program for artificial intelligence has been set up by the UAE to achieve this end. Its vision to become a world leader through the national use of AI is projected to be realized by the year 2031. The National AI Strategy 2031, aims to achieve an AI friendly ecosystem in its governance at all levels, education, financial services and economic sector. 

    In 2018, the Dubai Police launched a surveillance system called Oyoon that translates to eyes in Arabic. This surveillance system aims to monitor individuals or vehicles through a wide network of cameras, and this surveillance system basically aims to predict crime by raising any red flags identified in the environment with reference to the database that has already been fed to the system. This system allowed the arrest of around 300 suspects in the year 2018. 

    As per recent reports, the Dubai Police is working with IBM and Google to develop AI technology under its Smart Dubai 2021 initiative that would create a robot police force that would take the edge off the human police force in terms of patrolling residential areas and other public spaces. This real-life Robo Cop is said to be equipped with live imaging, facial recognition and a system for reporting crime. 

    The development of AI is still at the primitive stage; therefore, no legislations have been enacted to regulate that sector. However, the Ministry of Artificial Intelligence is said to develop legislations and frameworks that will regulate technologies in government and federal institutions. 

    Artificial Intelligence in the MENA Region 

    Apart from its growth in the UAE, many other countries in the Middle East and North Africa region are adopting artificial intelligence in their governance and justice system. The use of AI is quite recent; therefore, not many developments have been made in that respect. But, these countries have started to take steps to integrate AI and look towards the creation of smart cities. 

    Bahrain 

    As a step towards achieving their 2030 Vision, the Information and Government Authority of Bahrain organized a two-day event in 2018 for establishing and recognizing the importance of AI in developing smart cities as per the country's planning document. 

    Egypt

    The Egyptian Authority of Finance Control has laid down provisions to control financial transactions using AI. Further, the Egyptian National Telecom Authority aims to explore interconnectivity through the use of AI. 

    Saudi Arabia 

    KSA has also taken steps to include AI in its strategic planning document as part of their Vision of 2030. It has already started using AI for the purpose of Investment. It also attended the Conference on Artificial Intelligence and Robotics in 2017, though it has not seen much light in the law enforcement sector, Saudi is slowly inching towards its usage by beginning work on smart cities industrial zones.  

    Many more countries in the region as well as all over the world are adopting AI as a part of creating a smarter and futuristic nation in different sectors, therefore, enhancing and paving the way for a cohesive criminal justice ecosystem. 

    Conclusion

    Although the use of artificial intelligence is in its primitive stages, its future seems bright, provided it is used in an ethical manner. Further, the law enforcement community might not be well versed with technology; therefore, the implementation of the AI system needs to be gradual. Once law enforcement officials are able to gradually familiarize themselves with the technology, its use will become efficient and effective. 

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    Sun, 06 Dec 2020 03:18:00 GMT
    <![CDATA[Enforcing UAE Judgments in Egypt]]> Enforcing UAE Judgments in Egypt

    The United Arab Emirates (UAE) has entered into a cooperative arrangement with Egypt known as the 'Legal and Judicial Cooperation Agreement between the UAE and the Arab Republic of Egypt' in the year 2000. This arrangement governs the reciprocal enforcement of judgments between UAE and Egypt, and the enforcement of UAE judgments are thereby recognized in the territory of Egypt through this agreement. Legal and Judicial Cooperation Agreement between the Government of the United Arab Emirates and the Government of Egypt was published in the UAE pursuant to Federal Decree Number 83 of 2000 and published in Egypt pursuant to Presidential Decree Number 464 of 2000 and came about in order to obtain constructive cooperation between the two governments by establishing reciprocity of foreign judgments. 

    Chapter V of this Agreement dictates the recognition and implementation of judgments in civil, commercial and personal status articles. Article 26 of this convention states that each of the parties shall recognize the rulings issued by the courts of the other, thereby affirming that the enforcement of judgments passed in UAE holds the same binding nature in the territory of Egypt. Such judgments shall cover civil matters, criminal matters issued in civil courts, commercial and personal status matters provided that the court issuing the ruling is competent in accordance with the rules of international judicial jurisdiction in the respective country and such decision that shall be based on judicial or state procedures from the courts of the state. It is imperative that the provisions in recognition and implementation are compatible with the international treaties and agreements in force with the contracting party. 

    In certain cases, there can be a refusal to recognize the foreign judgment that has been mandated in Article 31, and the grounds for refusal of enforcement of a foreign judgment would include:

  • If the ruling passed in the judgment is contrary to the provisions of the Constitution; if such principles are contrary to the public order or morals of the country from which such recognition would be derived, in that case as well the foreign judgment could not be enforced. Therefore, a judgment executed in UAE shall not be recognized in Egypt if it holds to be conflicting with the public policy and morality of the principles in Egypt and if it is contradictory to the provisions of the Constitution of Egypt.
  • If any judgment is passed in violation of the law of the states and was passed in favor of persons without any legal representation or persons that are incapable of obtaining such legal representation.
  • If the judgment was passed by a court that was not fit or competent to pass such judgment.
  • An ex-parte judgment delivered shall not be enforceable, where the opponent convicted in absentia was not capable of representation to defend himself.
  • Any judgment passed against the laws of the country or passed in contravention to the laws shall not be enforceable in the territory of Egypt.
  • In all such cases, the judgment passed shall not be recognized in a foreign country, and the judgment passed in UAE on the above grounds shall not be recognized to be enforceable in the jurisdiction of Egypt. Article 32 explicitly states that the execution of the judgment shall be dependent on being in sync with the rules and law of the country where it is being enforced. For the judgment rendered in UAE to be recognized in Egypt, it has to be consistent with the laws of the territory of Egypt and cannot be in contradiction to the regulations of Egypt. The judgment shall be deemed to be competent in the cases where the jurisdiction of the court of the contracting party in which such judgment was pronounced follows the principles of competency which have been mandated in Article 29 and outlined below. Following are the grounds where a said judgment shall be deemed to be passed by a competent court:

  • Where the defendants' domicile or place of residence at the time of the lawsuit was located in that country.
  • If the contractual obligation which is the subject of the dispute has been executed in whole or in part in the state where it was pronounced or if it is obligatory to implement in it according to an explicit or implicit agreement between the plaintiff and defendant.
  • In cases of non-contractual liability, the act required for liability has occurred in that country.
  • If the defendant accepts explicitly or implicitly to submit to the jurisdiction of the court whether by selecting a chosen home or by agreeing on its jurisdiction where the law of the country does not prohibit such an agreement.
  • If the defendant has expressed his defense of the merits of the case without submitting that the dispute was not within the jurisdiction of the court.
  • In the case of personal status and expenses, if the opponent has a domicile or a residence in the territory of that state.
  • In the case of inheritance, if the deceased person had a domicile or property in the territory of that state at the time of his death.
  • If the defendant in that particular country has an agent at the time of taking the actions arising from the agency's work.
  • All such judgments pertaining to the grounds mentioned above shall be deemed to be competent and shall be fit for execution. The competent judicial authority in Egypt shall recognize or implement the ruling passed in UAE by firstly verifying whether the conditions stipulated in the legal and judicial cooperation agreement are met without being subject to an examination of the matter, and this shall be done by the authority itself and by declaring such decision. Upon such examination, if the decision declared deems the judgment to be fit and executable, then an order to execute such ruling shall be issued, and the effect of such ruling in UAE shall be equivalent to the effect in Egypt. The effect of such foreign ruling in Egypt shall hold the same effect as it would in UAE. However, there are certain documents that shall be required for the execution of the foreign ruling, and it is vital that all such documents be submitted. Such documents are addressed in Article 35 of the Agreement and include the following:

  • A full and complete official copy of the ruling along with the attested signatures from the competent authorities.
  • A testimony obtaining that the judgment holds power to order/request recognition/execution of the ruling. The party requesting recognition is required to obtain such testimony in most cases unless otherwise stipulated. 
  • Testimony has to be obtained in certain cases where the person who does not have the capacity to litigate to show that he has represented legal litigation. 
  • In cases of absentia, a copy of declaration authenticated by its conformity to the original has to be submitted, or any other document has to be submitted that shall prove the defendants' true declaration of the case in which the judgment was issued.
  • For the implementation of the ruling, the official copy must be affixed to the executive form. 
  • All documents must be officially signed and sealed by the competent court in order for the foreign judgment to be enforceable. It is only after the establishment of conciliation before the judicial authorities in accordance with the provisions of the agreement that the judgment rendered in UAE would be recognized and enforced in the jurisdiction of Egypt. This conciliation would include verification that it has the power of executive support in the country where it was established, in this case, UAE and that it is void of including provisions that contradict the provisions of the Constitution or the principles of the system. The party that is aiming and requesting for such recognition shall have the duty to present an official copy and certificate from the judicial authority affirming that it possesses such power stated in the executive bond. All such documents shall be signed and sealed by the court of the competent authority. The executive bonds produced in UAE would be ordered to be executed in Egypt in harmony with the procedures in relation to judicial rulings and that such rulings do not contradict the provisions of the Constitution or the principles of public order and morality in Egypt where it is required to be implemented. The party requesting such recognition of document shall submit an official copy stamped with the seal of the notary or notarial office. It shall also present a certificate that justifies the statement that the document is in possession of the powers of the executive bond. Article 34 dictates that the implications of an order to execute the rulings that have been issued in one country by a competent court shall be enforced and have the same effect of rulings as if issued by the courts of the other country. Therefore, the enforcement of judgments passed by the courts of UAE shall have the same effect of the ruling and be executed in Egypt, provided that it does not contravene any of the grounds that have been mentioned in the agreement for refusal of execution and provided that the judgment does not hinder any of the principles of public order and morality. 

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    Sun, 05 Jul 2020 12:00:00 GMT