СТА - ведущая юридическая компания в Дубае с офисами по всему мируhttps://www.stalawfirm.com/ru.htmlSTA Law Firm - Блоги - UAE Commercial LawruCopyright 2024 STA Law Firm All Rights Reserved<![CDATA[Proposed Amendments to the Saudi Commercial Agency Law]]> Proposed Amendments to the Saudi Commercial Agency Law

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

Inclusive Eligibility for Foreign Entities

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

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

Intellectual Property Rights

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

Termination and Indemnity Clauses

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

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

Exclusivity Modifications

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

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

Dispute Resolution Committee and Penalties

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

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

Conclusion

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

 

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Sat, 27 Jan 2024 00:00:00 GMT
<![CDATA[Tri-Party Agreement & their Implications in UAE]]> Tri-Party Agreement and their Implications in the UAE

What is a Tri-party Agreement?

It is an agreement between three parties. In other words, when three-parties has an intention to do the things on which they have agreed. The Tri-parti agreement usually happens in financial transactions. As per the Article 125 of the UAE Civil Transaction Act (the "Code"), there can be a meeting of more than two -minds that may agree to produce the legal effects. However, as per Article 126 of the Code, Contract should only be on the legal things.

For instance- A agrees with B to supply goods to him, but A cannot pay the full amount at the time of receiving the goods. A brings C who agreed that if A fails to pay the full amount, then C will pay the amount to B. This a Tri-party agreement between A, B and C where three parties agreed to do the things.

Interpretation of Tri-Party Agreement

In common law practices, the interpretation of a contract is always an analytical activity, the aim of which is not to ascertain the purposes of the parties but to evaluate the contemporaneous sense of the contractual language using an objective standard. However, discussed below, the UAE Civil Transactions Act does not make it a common practice.

Article 248-256 of the Civil Transaction Law there are three instances where the interpretation of the contract law is necessary. 

  • Plain Expression
  • Two situations may be differentiated in the Plain Expression. The agreement involves an outstanding usage of the word which coincides with the real intention of the parties. Secondly, the word does not actually mean what you think.

    If in the first instance, the contract's expression is simple and complies with the will of the parties, it cannot be interpreted in any further way. Therefore, the judge should not be in disagreement with the law in order to recognize the apparent meaning of the term. In the absence of express rules, the Civil Transactions Act makes judicial remedies undesirable. This law was enforced many times by courts in the UAE. For example, if the contract language is plain and apparent, the clarity of that wording does not differ.

    In the second case, the word is clean and not real, since it was against language. The parties did not imply the true will of the parties. The vocabulary of the contract is not clear or complete as to what it intends to convey. Despite the clarity of the expression, the court is able to make an interpretation, as clarity is clearly what the expression means in this case, not the intent of the parties. In such a case, priority should be given to the actual meaning of the expression over the meaning in which the parties interpreted the expression. The Civil Transactions Act states in Article 285(1) that the real object of the parties and not the language and syntax of the agreement is what matters. This rule can be found in judgement number 294 of the Dubai Cassation Court of 2008, which claimed that 'In the interpretation of the contract, the true meaning of the word is decided and not its obvious wording or syntax.

  • Equivocal/Ambiguous Expression
  • When The sentence has two or more implied definitions, and both of these can be interpreted without a language distortion. If a contractual term is so ambiguous that the context can be interpreted in more than one way, then clarification is necessary. Article 265(2) of the Law on Civil Transactions provides information on how to interpret it: 'Without stopping the literal meaning of language, if there is room for construction of the contract and with the search for clarity in this respect, the common intent of the parties shall be examined in accordance with current relationship and good faith between the Parties. The Dubai Cassation Court ruled that the purpose of the contract was defined by true intentions and meanings, rather than by the wording or syntax, in compliance with the procedure of that court and with the provisions of Articles 258 and 265 (2) of the Civil Sales Transactions Act. The contract must be construed in light of the parties' mutual purpose, not in terms of its literal nature.

    However, a strong distinction needs to be made between contextual and extrinsic evidence. It is not appropriate to use the expression as a guide to the development of a contract, although using the expression to interpret a contract is reasonable. Thus, when reading the contract, the intentions of the parties are readily apparent. This is the antepedemean proof rule. Article 36 of the UAE Penal Code mandates the use of the symbol.

  • Construction in case of doubt
  • As per Article 226 of the Civil Transactions Act, A debtor has the right to run a court under the Civil Transactions Act. This is a lengthy article that needs to be read attentively. The main problem with this paper is that it raises questions as to whether or not there are any suspicions and who has to be viewed as the debtor in favor.

    The only uncertainty which cannot be understood by applying the rule of construction laid down by Article 265 of the Civil Transactions Act is the doubt contemplated in Article 266; for if Article 266 is deemed separately true and other provisions in isolation, those other arts would no longer be relevant. Article 266 must also be seen as an exception to other building rules, for instance, the law of insecurity.

    The most problematic side of Article 266 is that the term "debtor" is vague. Each party in most contracts has the capacity to demand of the other party in return for its obligation to do something else. In exchange for this obligation, Article 266 should have replaced the word "debtor" with the word "aggrieved party" However, the interpretation of the 'contra proferentem,' in other words against that party which proposed the ambiguous clause would have been wiser. However, no case in the UAE has addressed the questions concerning interrelationship to the best of my knowledge.

    The general judicial inquiry indicates that the courts of the UAE usually comply with legal requirements while reading a contract. However, it should be noted that all of the above statutory rules are not obligatory – they are just guidance for the court in order to help decide the alleged intent of the parties.

    The parties can, by agreement, change or exclude any of these statutory requirements and set out their own architectural rules.

    Contract of Guarantee as a Tri-party agreement

    The contract of Guarantee is the perfect example of a tri-party agreement. Guarantees usually come under the purview of the Civil Code of UAE Article 1057 of the Civil Code describes guarantees as a suretyship consisting of combining the responsibility of the guarantor with the liability of the obligor in the fulfilment of her obligations. However, if the Guarantee is of such a type that the guarantor earns some remuneration by giving the Guarantee, then the Contract of Guarantee would be governed by the Commercial Act.

    For lenders, the Civil Code dictates the rules about guarantees. A guarantor's responsibility is incidental to the principal debtor's obligation. Therefore, if a principal debtor does not comply with his or her commitments, the Guarantee will no longer apply.

    If the principal debtor becomes bankrupt, the creditor must prove its debt in the bankruptcy, without which it would forfeit its right to claim against the guarantor to the extent of any sums which the creditor would have earned had it proved such debt in the bankruptcy; and when a debt has been paid back, the borrower must send the guarantor all required papers to ensure the guarantor has the power to take legal action against the principal debtor.

    It is necessary to remember that a guarantor's financial commitments are only backed by his/her own personal properties. This provision may preclude subordination of other liens that have been secured by a mortgage or pledge over the properties of the guarantor.

  • Enforcement of the contract of Guarantee 
  • Lenders should consider the overall procedure for implementation of a guaranty, and how long the process will take. A lienholder must first inform the guarantor of the default of the primary obligor by serving legal notice in compliance with the terms and conditions of the guaranty. A lender may either apply for attachment directly or launch a complaint prior to filing an attachment.

    The next move is for the borrower to file a complaint against the guarantor and go to court to enforce the Guarantee (within eight days from the date on which the assets of the guarantor are attached, if applicable). Prolonged court action normally lasts from 8 and 10 months, during which defense has been raised. The court may appoint a financial expert (usually a chartered accountant) to assess any changes the guarantor may be needed to make to their loan. Luckily, in many cases, prosecutions take just two years.

    Once the judgement is obtained, the case will be referred to the execution court for the liquidation of the guarantor's properties, and any funds realized from the liquidation will be charged to the lender to the extent of the guarantor's liability under the Guarantee. Any excess will be returned to the original guarantor.

    Termination of the Tri-Party Agreement

    There are many ways to terminate the contract. The termination of the contract is discussed in the Articles from 273-367 of the Code

  • When both the parties agree to terminate it. The Civil Code provides for the situations in which the parties may end a contract due to incompliance. The provision must be drawn in a manner consistent with UAE Legislation.
  • Should termination occur due to violation of the specifications or failure to perform, it can permit termination without notification; otherwise, the notice is compulsory under Article 271 of the Civil Law. In the absence of advance warning. Regardless of the clear clause in the contract, the parties are free to mutually leave the contract. 

  • Order of the court.
  • As the name suggests, the parties may request termination upon reaching out to the proper authority such as Court or Arbitration Institute. This option can also be exercised in the scenario where the termination clause is also there in the contract.

  • By operation of the law
  • We shall take into account the law governing the contract within the structure of the termination of the contract. Various types of contracts, depending on your country of residence, are offered in the UAE.

    Alterations may make the contract unfeasible to conduct an occurrence outside the control of the parties or the unforeseen event. That is in the customer's best interest. Moreover, any conditions of public interest can also allow the parties to dissolve the contract. Each party must be transparent about the unpleasant and unprofitable existence of the contract.

    Article 247 provides that if the other party does not comply with the negotiated terms, all parties cancel the contract. 

    A party has the authority to refuse to fulfil its obligations under a contract where each party must exercise its share if the other party fails to exercise its obligations. The other party is not obliged to do so if one of the parties does not conduct the contract. The continuation of the contract relies on the other party's ability to continue. Because of the failure to perform or violation of consent, the contractor may attempt even to terminate the contract. In this clause, all parties are seeking harm or redress and must give the other party prior notice. You should encourage the failure to fix it instead of issuing an alert.

    The termination of the contract is a challenging task. However, the procedure of terminating a contract can be stopped by drafting a mutual termination provision. The related clause strengthens the legality of the court proceedings by reducing future problems of the law. Henceforth, prior to terminating any commercial contract, the party must assure that there exists a legal right to dissolve the contract or must obtain legal assistance from Corporate Lawyers in UAE to review the terms of the contract in accordance with the UAE Civil Law and other contractual laws of the country to avoid the unnecessary hassle of termination before the court.

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    Wed, 03 Feb 2021 12:27:00 GMT
    <![CDATA[Ajman Freezone Authority]]> Ajman Freezone Authority

    1. What law established this freezone?

    The Ajman Free Zone was established in 1988 and was granted autonomous status in 1996, by the Ajman Emiri Decree No. 3/1996.

    2. What are the main internal regulations governing this freezone?

    The Ajman Free Zone Authority has issued an "Integrated Management System" document that sets out the free zone's commitments.

    3. Does this freezone have any reciprocal arrangements with other freezones?

    This free zone does not have any reciprocal arrangements with other free zones.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this freezone must still comply with? What are the most important examples of how this impacts operations?

    The key areas of UAE Legislation businesses operating in this freezone must comply with are:

    • UAE Federal Law No. 2/2015 concerning Commercial Companies.
    • UAE Federal Law No. 8/1980 regarding the regulation of labor relations and its amendments.

    In general, UAE legislation will cover any matters not covered by the free zone's internal regulations.

    5. What are the key UAE and Emirate onshore agencies a business operating in this freezone would need to register or comply with?

    The key UAE and Emirate onshore agencies a business would need to register with will depend the on the activity of that company.

    6. How does a company set up in this freezone?

    Companies wishing to establish themselves in this free zone must follow a three-step procedure.

    Step 1: Submission of Documents (all sufficiently attested and notarised)

    • Passport Copy of the Manager
    • Passport-sized photo of the Manager
    • No Objection Letter from the Current Sponsor (in cases where the applicant is a resident in the UAE)
    • Business Plan

    There are additional documents to submit if the entity setting up the company is a corporate entity, as opposed to being a natural person:

    • Articles of Association
    • Power of Attorney authorizing the individual concerned to undertake the company registration
    • Certificate of Incorporation of the parent company
    • Board Resolution from the Parent Company authorizing the establishment of the branch or subsidiary (in cases involving the establishment of a company branch or subsidiary).

    Step 2:

    • Payments must be completed: Registration Fees, Licensing Fees

    Step 3:

    • Lease agreement must be signed

    7. What features do companies set up in this freezone have?

    Like all free zones, Ajman Free Zone allows 100% foreign ownership. The free zone also provides a 100% exemption for corporate tax and income tax. In addition, the free zone offers low set up costs as compared with other free zones.

    8. What can companies set up in this freezone do?

    Companies set up in this free zone can conduct activities that fall within the scope of the following licenses: e-commerce, trading, industrial, professional/services and national industrial.

    9. What can companies set up in this freezone not do?

    Companies set up in this free zone cannot conduct activities that fall outside the scope of the following licenses: e-commerce, trading, industrial, professional/services and national industrial.

    10. What types of business are allowed to operate in this freezone?

    Small and medium industries, business service sectors are among the businesses allowed to operate in the free zone.

    The following business structures are allowed to operate in the free zone:

    • Free Zone Entity
    • Free Zone Company
    • Branch of a Local Company
    • Branch of a Foreign Company

    11. What inheritance laws apply in this freezone?

    As for all areas of law that are not covered by the Ajman Free Zone's regulations, the general laws of the UAE are applicable (Islamic Sharia Law). A non-Muslim expatriate can request that the laws of their home country apply, as per the Personal Affairs Law, UAE Federal Law No. 28/2005.

    12. What taxation applies?

    The Ajman Free Zone allows for 100% foreign ownership, free of all types of taxes (including corporate and personal).

    13. What accounting and auditing rules apply to businesses operating in this freezone?

    Businesses operating in Ajman Free Zone are in no obligation to submit auditing reports.

    14. Where do businesses operating in this freezone generally locate their bank accounts?

    Businesses operating must select a bank in the Emirate in which they are operating to open their bank accounts, as per the provisions set out in the Commercial Companies Law.

    15. Are there any specific rules governing when moveable property in removed from the freezone area or transferred into the freezone area from another jurisdiction?

    In accordance with the Ajman Free Zone Regulations, businesses set up in the Ajman Free Zone must limit their activities to within the free zone, in order to operate within the mainland, a local agent/distributor must be appointed.

    16. Are any specific licenses required to operate as a specific type of company in this freezone?

    Four types of licenses exist in the Ajman Free Zone:

  • Trading License, which concerns companies that operate in the trade of goods, such as sale, purchase, import and export of goods.
  • Industrial License, which concerns companies that produce and manufacture goods.
  • Professional/services License, which concerns companies that offer services
  • National Industrial License, which concerns companies that produce and manufacture goods for government entities.
  • 17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this freezone authority?

    There is no such specific ongoing regulation or monitoring of firms.

    18. How are disputes settled with companies in this freezone?

    Within this free zone, disputes are settled through the UAE courts. If a case were to be brought against an Ajman Free Zone company, it should be filed with the courts of Ajman.

    19. How are disputes between onshore companies and companies in this freezone settled?

    Dependant on the contract concerned, companies hold the option of settling disputes in the courts of Ajman.

    20. What are the main rights and duties of an employer and employee working in this freezone?

    The provisions of UAE Federal Law No. 8/1980 and its amendments apply to employers and employees in this free zone such as:

  • Article 91: Employer must provide the employee with protective equipment, clothing, instructions on all other means of protection to protect him from hazards of injuries, hazards of fire and vocational diseases.
  • Article 92: Employer must display at a conspicuous point detailed instructions, in Arabic and in a language understood by employees, concerning methods to prevent fire and protect employees from dangers.
  • Article 93: Employer must provide each 100 employees with one medical aid box.
  • Article 94, 96: Employer must provide proper cleanliness, ventilation, adequate illumination, potable water and toilets, clean atmosphere and precautionary measures against fire and electric current.
  • Article 95: Employer must appoint one physician to do full medical checkups at least once every 6 months for employees exposed to an infection risk. Employer must record the results.
  • Article 96: Employer must provide employees with means of medical care.
  • Article 97-98: Employer (or his representative) must regularly inform employees of dangers related to their profession and provide written preventative measures.
  • Article 99: Employer must forbid alcoholic drinks and intoxicated.
  • 21. How are employment disputes between employers and employees working in this freezone settled?

    In order to manage these kinds of disputes, one of the parties must submit a complaint to the Ajman Free Zone Authority. If the Ajman Free Zone Authority is unable to manage the matter, it will refer it to the Ministry of Labour. Failure to settle the matter amicably will result in the matter being transferred to the Courts of Ajman.

    22. What entry qualifications and permits are required for staff working in this freezone?

    Qualifications will depend on the employee's position and their company's license. An employee requires a visa/entry permit for which a personnel sponsorship agreement must be submitted. A residence permit must then be obtained; this requires an Emirates ID card and a medical check-up.

    23. How are staff working within this freezone registered with the authorities?

    Staff working within this free zone are registered under their company's name, which is registered in this free zone. The company's trade license and the employee's passport must be submitted to the Ajman Free Zone Authority's Licensing Department to obtain the required visa.

    24. What rules govern the remuneration and minimum benefits of staff working in this freezone?

    UAE Federal Law No. 8/1980 and its amendments grant employees the right to obtain insurance and end of service benefits.

    25. What rules govern the working time and leave of staff working in this freezone?

    UAE Federal Law No. 8/1980 and its amendments give employees the right to at least one rest day per week, if an employee works on a Friday they can obtain an additional 50% of their wage. The maximum working hours for an employee is 40 hours per week. As for the leave of staff working in this free zone, if they have been employment for more than 6 months and less than a year, they are entitled to annual leave of two days per month and 30 days annually.

    26. What are the main features of a property lease in this freezone?

    The features of a property lease in this free zone are the same as those in the UAE in general.

    27. Is it possible to apply for a building permit in this freezone? How is this done and what steps are required?

    There is no possibility to apply for a building permit in this free zone.

    28. What environmental requirements must construction companies building in this freezone consider, e.g. form of building, landscaping or building height?

    The standards set out by the Health, Safety and Environmental Management System Regulations.

    29. What are the key restrictions when leasing a property in this freezone?

    The key restrictions of a property lease in this free zone are the same as those in the UAE in general.

    30. What are the rules governing the use of utilities in this freezone?

    The use of utilities is determined based on actual usage in this free zone.

    31. How do retail premises establish themselves in this freezone?

    Retail premises establish themselves in this free zone the same way they do in the UAE in general.

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    Wed, 04 Nov 2020 10:15:00 GMT
    <![CDATA[Trade Secret Protection ]]> Trade Secret Protection 

    Introduction

    The prowess of a company depends on its ability to work smarter than their competitors. This can be achieved through specifically designed operational workflows, specialized technologies or structural control practices that enable a firm to stand out within a particular market or industry. Such intellectual knowledge is typically only available to those within their respective organizations. However, in many cases, the protection of these trade and operational secrets can be difficult to oversee and enforce. The lack of proper protection could invariably affect a company in the most adverse manner if competitive rivals gained access to this intellectual property.

    The necessity to protect a company's trade secret is essential, and thus, efforts are made to build a protective wall around the key secrets of the firm. This article will provide an overview of trade secrets and its protection and delve further into the provisions available for companies in the UAE while confronting potential threats that need to be addressed. 

    Overview of Trade Secret Protection

    The subtle truth behind every successful company is the existence of an exceptional trade secret that differentiates it from its competitors. This information is sensitive and is not readily available to any individual outside a particular firm. The economic advantage created for the company is why this information needs to be protected. Some forefront nameworthy runners who protect their trade secrets include Google who protects the algorithm of its search engine or Coca Cola who preserves the secret formula to their product. All these companies are just a mere layer of mist over an ocean of companies trying to protect their operational and trade secrets. 

    Many jurisdictions treat trade secrets protection in different ways but, the integral purpose of protecting this information is to ensure that a company does not get manipulated or cheated by another competitor in the market. Irrespective of the height of protection provided, a trade secret can be recognized if they fulfill the following three criteria:

  • The information that is being protected is not public information.
  • The information generates an economic advantage for the firm.
  • The information is actively protected by the members of the company. 
  • Trade secrets can be in different forms - such as a pattern, formula, recipe, method, instrument or process - that is not directly apparent to the surrounding population. Considering that these trade secrets were developed or generated through intensive, lengthy and expensive methods, the existence of these documents are considered as classified or top-secret documents of the company. Since these are developed through extremely intensive processes, competitors have all the more motivation to learn these trade secrets through any method possible. One of the many defenses a company takes to protect its trade secrets is by ensuring that the employees who join the firm agree and sign a confidentiality, non-compete or non-disclosure agreement that restricts the sharing of the firm's intellectual property.

    The US jurisdiction allows each state to enforce state developed regulations to protect the trade secrets of the company operating within that state. They protect trade secrets that are of all forms and type related to engineering, financial, scientific, business, technical and economic in nature. This would govern the tangible or intangible trade secrets, and the methods and practices used to protect them. Regardless, important information that a company must bear in mind is that if the information is discovered either through independent discovery or through the failure of a trade secret holders to preserve the secret, the protection embalming the trade secret will be retracted.

    Irrespective of the features and the rising need to protect a company's trade secrets, it is important for entities to take appropriate measures to tackle the issue at hand and preserve their secrets. With the rapid advances with digital technology, it is becoming more challenging for companies to protect their trade secrets as information can be accessed without proper authorization and transmitted quickly across systems. This would need to be considered by companies when they develop and establish a framework to protect their trade secrets. Companies can also train their employees in risk and quality practices, to maintain due diligence and care when handling trade secrets in order to avoid misappropriation of information. 

    The level of protection and framework available through regulations and enforceable legislation will vary from one country to another. While one country may offer extensive and stringent protection for trade secrets, other countries may lack the required framework to support and protect companies to this effect. This should be considered by companies, and appropriate precautionary measures must be taken to ensure the care and safety of their trade secrets. This points us to the reason why large corporate giants like Facebook and Uber fight to protect their patents or trademarks, which are essential factors that contribute to the success of these companies. 

    Unlike patent protection, the laws used to protect trade secrets cover a range of products such as patents, trademarks and other intellectual or tangible property that the company can protect using the trade secrecy laws. Depending on the jurisdiction that the company operates within, the punishment imposed on parties that violate the protection of trade secrets may include penalties or even imprisonment which could go up to USD 5 million and 15 years respectively. However, the company must be able to prove to the respective legal system that they had taken adequate precautionary measures to safeguard their trade secrets while considering the nature of the market and the plausible threats arising against its safety.

    There are three kinds of protection that can be provided to safeguard trade secrets. First, store trade secrets in a physical location and restrict the access to that location like Coca Cola does to protect its secret formula by keeping it in a vault. Second, use digital security measures such as strong passwords, firewalls or encrypted flash drives to protect the information on the company's system. Finally, use legal measures and tactics such as marking confidential documents with a stamp stating "Confidential" to alert its users to be careful not to divulge this information with anyone else. 

    Trade Secret Protection in the UAE

    The significance of trade secret protection even in the UAE is deemed highly necessary for the survival and growth of the business and the economy. In order to help the businesses, protect their trade secrets, the legal system within the UAE has created provisions that would always allow a company to stay one step ahead of the threats. The initial step taken by the UAE to introduce and protect trade secrets in the country was in 2006 through the establishment of the Federal Law 31 of 2006

    This framework details the provisions set-up to regulate the activities and possible threats surrounding trade secrets. It states that if a company acquires any specific knowledge which could classify as trade secrets through legal avenues, then the company is allowed to use that information without fearing any repercussions. They also extend protection to instruments of the company which need not be new but is not patented. This is an added benefit as companies in the UAE cannot patent their product if it is not new or unique. This new provision will extend the spread of protection and not only ensure protection for the company's trade secrets but also provide the same for patents and other intellectual property of the firm. In addition, the protection that the trade secrets receive possesses an indefinite useful life. 

    As misappropriation by employees is one of the largest causes of violation of the protection of trade secrets, Article 905 of the UAE Civil Code provides provisions to challenge that threat which states that it is the responsibility of the employee to ensure that any trade secrets of the company are not divulged through them accidentally or intentionally. This provides a safety net for employers who fear the safety of their secrets and consider it to be in an unpredictable environment. Furthermore, the UAE Labor Law (Article 120) allows for companies to terminate their employees without any prior notice if they were found disclosing confidential information. 

    Since, the threat to trade secret protection arises not only from external factors but also, from internal factors, companies in the UAE can protect themselves by drafting a confidentiality or non-disclosure agreement with any of its employee or third parties. Also, the company should issue guidance that allows and informs against the disclosure of any sensitive company data. If the information is shared with other parties, they should also be educated that the information is sensitive and must not be communicated with anyone else. 

    Apart from the initial legal protection established by the UAE, a new Companies Law was introduced in 2015, which included a provision for the "Disclosure of Company Secrets" in the UAE. This allowed for greater protection of trade secrets under the scope of three different laws:

  • Civil Transactions Law – imposes an ongoing obligation on employees to preserve a company's trade secrets even after the end of their employment.
  • UAE Penal Code – punishes any party who discloses a trade secret without the legal permission to do so.
  • UAE Patent Law – protects knowledge gained during the period of employment that could be regarded as a company's trade secrets.
  • Along with the guidance provided, the UAE's Companies Law details punishments that would result in the event of failure to safeguard the trade secrets of a company. It states that the punishment will be enforced if any employee of the company (including a chairman or board member) intentionally discloses the trade secrets of the company that can cause harm to the firm's operations. Albeit the language of the provision can be interpreted in several ways, the quintessential need to motivate parties associated with the company to protect the company's trade secrets can be said to be achieved through this provision. 

    If a legal or financial consultant, subscription director, covering sponsor or any other representatives intentionally takes advantage of the company's confidential information for their benefit, they will be held liable and, in effect, be punished for the non-protection of trade secrets. However, there are defenses stating that a legal consultant may not be deemed as a violator if they did not use the company's trade secret for their own benefit. This opens an avenue of subjective assumptions as to whether anyone who claims and proves they did not intentionally divulge the information will be held liable under the law.

    Despite the gaps that exist within the legal frameworks governing trade secrets in the UAE, it can still be assumed that adequate efforts are being conducted by the legal system to ensure that proper frameworks are available to deter parties from breaching the safety measures in place. If found guilty, parties who have disclosed the information will be penalized and charged with criminal penalties such as fines of at least AED 20,000 and a minimum of one-year imprisonment. 

    Challenges surrounding Trade Secret Protection

    It is difficult to establish the extent of loss suffered as a result of 'theft' of trade secrets - it is difficult to measure, and the value cannot be accurately ascertained. Uncertainty also exists regarding when such secrets were compromised. Many companies realize that their trade secrets were stolen years after the crime had been committed. In this timeframe, it would be difficult to trace the theft back or ascertain the losses incurred as a result of the misuse of secrets. 

    As discussed above, employees may transfer the secrets to competitors as they change employment, especially if they stand to profit from the exchange. This would weaken the company's ability to continue protecting the secrets from its competitors in the event of such a breach. With advancing digital capabilities, companies stand the risk of being hacked, with trade secrets being stolen if an outside party gains access to the entity's network and data. So, if the appropriate risk response controls have not been set-up to prevent information hacking, then the ability to duly protect the company's property will be left to question. 

    Many of the violations usually take place from within the firm either due to negligence or due to intentional embezzlement by its employees. In order to mitigate the risks involved, companies can explicitly make provisions within the drafted employment contracts that bar employees from disclosing the company's trade secrets without facing legal repercussions. They can also conduct ongoing surveillance of employees to ensure that no unusual behavior occurs that would invariably affect the company's well-being. Finally, companies can mandate risk and quality training to their employees to educate and remind them of the company's policies regarding the protection of trade secrets and the penalties associated with its disclosure. 

    Another challenge that arises in the implementation of the regulations within the UAE is the misinterpretation of the law. Under these provisions, there is no parameter to assess the 'intentions' of a person to actually cause harm to a company. Such phrases can be easily misinterpreted or miscommunicated by the parties in the discussion. 

    Conclusion

    Some say that curiosity kills the cat but imagine allowing the cat to find what it is looking for - which is, in our case, our trade secrets. Sometimes it is not the threat we must fear but, the lack of preparation we take to push the threat away lest we fall into a spiral of doom. Many companies that are performing and growing at an exponential rate in the market are either not wary of the existence of curious cats out in the market, or they disregard the ability of these cats to impact their firm and market presence negatively. Is there a substantial buffer of protection that the company has allotted for or threats that they have foreseen? Are they prepared to fight it? 

    Conclusively, it can be understood that in today's age and time, one of the most valuable assets possessed by a company is its trade secrets. The adequate amount of protection for a company's trade secrets can give it a reason to fight. The protection that the UAE legal system provides is a growing set of enforceable protective methods. Unlike many jurisdictions, the UAE imposes criminal penalties and punishment in the event of a violation of the protection of a company's trade secrets. Taking into perspective all the threats involved, companies need to promptly prepare a more rigid and unbreakable wall of security; the lack of such a defense system would not only void the expected benefits but might raise concerns on the company's ability to continue as a going concern in the long run.

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    Sun, 18 Oct 2020 15:49:00 GMT
    <![CDATA[Parallel Imports]]> Intellectual Property Rights: Exhaustion of Ownership and Parallel Imports

    Introduction

    Parallel Imports 

    The term parallel import denotes importation of goods legitimately acquired from the owner of the goods subsequently sold in an unauthorized manner through unauthorized trade channels. 

    These goods may also be referred to as grey market goods, since, despite being legitimate, they lose their value when they are sold through unauthorized trade channels. An owner of a registered trademark earns goodwill through the sale of his goods through a particular channel as authorized by them; however, once the goods leave that channel, it compromises the integrity and reputation of the goods that have been registered as a trademark.

    There are two types of parallel imports, namely, active parallel imports and passive parallel imports.  

  • Active Parallel imports
  • When a licensee of the trademark owner sells goods in the jurisdiction of the right holder itself or in the jurisdiction of another licensee who is in direct competition thereof, in this type of parallel import the breach arises when the licensee acts in contravention of the contract between him and the right holder.

  • Passive Parallel imports
  • This kind of parallel import is much more common; it arises when a third-party purchases goods owned by the right holder from one country and resell the same in another country. 

    A breach of an agreement between the parties regarding parallel imports is done with the intention of gaining higher profits due to price differences of identical goods. When such a breach arises, it contravenes any such provisions regarding international licensing and distribution as agreed upon between the licensee and the right holder. Therefore, it is imperative to keep watch on where the goods are being distributed and to ban the distribution of goods in such countries as prohibited by the right holder. 

    Doctrine of Exhaustion 

    An owner of an intellectual property right possesses the sole exploitation rights over his goods. He is further empowered to be protected by such laws in the country where such protection is granted to him. The Doctrine of Exhaustion or first sale doctrine is basically an exception to this rule, and it entails the exhaustion of rights of the right holder once he has consented to the lawful sale of the products covered under the intellectual property rights held by him. 

    To understand this concept better, let's take the example of reselling preowned cars. A manufacturer or a right holder has the authority to prohibit other manufacturers from selling his product; however, this right is exhausted once the car is sold lawfully to a customer and that customer decides to resell the same to a third party. The right holder shall then, not have any rights over prohibiting such resale. This basically means that the right to sale over the same goods cannot be practiced twice by the right holder.  

    The doctrine of exhaustion can be divided into the following types: 

  • Regional Exhaustion 
  • The doctrine of regional exhaustion has been adopted by the European Union. This doctrine basically imposes a disability on the right holder to prevent the subsequent sale of a product in the same region (here, the EU) or any other country that is part of the same region. 

  • National Exhaustion 
  • This doctrine relates to the domestic market. Once the first sale has been made within the domestic market, the right holder is prohibited from receiving any further profits or claiming any rights over a subsequent transaction that takes place in that regard. This doctrine basically prevents the right holder from receiving profits multiple times out of the same transaction or from goods that have been sold by him once. It, therefore, protects the rights over profits of the party, making the subsequent sale of goods. 

  • International Exhaustion 
  • This doctrine is based on the presumption that once the goods are placed on the market, they leave the control of the right holder. Therefore, this doctrine basically views the international market as a singular market; hence, goods sold by the right holder, for the first time, anywhere across the borders, cause the right holder to relinquish his rights thereof. 

    It is imperative to note that, the abovementioned doctrines can only be adopted as per the regime that is chosen by the country concerned in order to curb such practice. 

    For instance, A, a right holder, sells his product to a third party within his territory who further sells those products to B, in another country. The question that would arise in such a situation would be whether A's rights have been exhausted once the first sale of the product is completed. This question can only be answered by taking into consideration the international exhaustion regimes adopted by A's country. 

    TRIPs on Parallel Imports

    The Agreement on Trade-Related Aspects of Intellectual Property Rights (popularly known as TRIPs Agreement) is an international agreement between member nations of the WTO, and this agreement lays down provisions regarding effective implementation of trade-related intellectual property protection. 

    That being said, the TRIPs agreement does not contain any such concrete provision regarding parallel imports. Dispute settlement mechanisms under the agreement allow right holders to bring action against another state; however, Article 6 of the Agreement states that no complaint can be entertained with regards to exhaustion. 

    Further, the TRIPs agreement, with regards to English and Japanese law, does not contain any such provision barring importation of goods subject to a notice being given about restrictions regarding such importation.

    Despite not containing any such provisions regarding parallel imports within its Articles, it is important to note that, it gives States the right to choose any such regime that they may think fit regarding international exhaustion within their domestic laws. 

    Parallel imports in the Middle East 

    Many Middle Eastern countries do not have any laws prohibiting parallel imports in the country. Countries like Kuwait, Bahrain, and Turkey etc. are a few that do not prohibit parallel imports under their trademark law. However, the following countries have other provisions that may be implemented to bar parallel imports;

  • Kingdom of Saudi Arabia 
  • Though KSA does not recognize the term parallel imports in its trademark laws, there are provisions in the customs law prohibiting imports/ exports of goods by unauthorized agents. The rights holder may register themselves with the Customs along with a list of those agents, as authorized by them. An agent or distributor selling goods in an unauthorized fashion may be issued a cease and desist notice and further can be dragged to court for non-compliance of the same before the Ministry of Commerce. 

  • Jordan 
  • Genuine import and export of goods are allowed regardless of whether the agent importing/exporting it is authorized or not. However, as per customs law, action can be brought about in case of counterfeit goods. 

  • Qatar 
  • The right holder having a trademark registered within the territory of Qatar is not entitled to bring any action regarding parallel imports. However, under their Agency Laws, the right holder may bring action against an unauthorized agent. 

  • UAE 
  • The concept of parallel import is not recognized by UAE trademark laws; however, Agency Laws to prohibit the same may be implemented. 

    Parallel Imports in the UAE 

    The UAE, like several other Middle Eastern countries, does not contain provisions relating to parallel imports in their trademark laws. However, in order to cease the flow of parallel import goods in an unauthorized manner, Agency Laws may be applied. 

    Commercial Agency Law by Federal Number 18 of 1981 amended by Federal Law Number 2 of 2010 lays down certain requirements of a commercial agent:

  • A commercial agent shall be a UAE national or a company in the UAE owned in 100 percent capacity thereof by a national. 
  • Only agents registered under the Ministry of Economy and Commerce are authorized to engage in business.
  • The agent and the principle are to be bound by a written agreement, which must be registered with the Ministry of Economy and Commerce.
  • Therefore, as per the above, any goods imported in contravention of the above are liable to be ceased by Customs, and the Police is entitled to take custody thereof. Further, action can only be invoked if the above conditions are satisfied. If an agreement is entered into unaccompanied by registration, the agreement is void ab initio. 

    It is important to note that counterfeit and unauthorized goods being sold with regard to the pharmaceutical sector poses a major threat to public health and safety. Especially in GCC countries wherein, the IPR laws are not as stringent regarding parallel imports. With regards to pharmaceutical products, it is important for the right holder to have full control over the distributional channels that their products pass through. Therefore, GCC countries must put in place policies that prevent illicit trade. GCC countries should also focus on scrutinizing free zones to rule out the possibility of counterfeiting.

    Further, the UAE enables manufacturers and trademark holders to approach the courts regarding parallel importation under anti-piracy laws as well. A landmark case saw the imprisonment of six foreign nationals who engaged in importing goods from another country without the permission of the right holder. In this case, the six persons including the shop manager engaging in the sale of such goods were arrested following a raid of their shop, with imprisonment of the manager for a period of two months along with a fine of AED 20,000 and deportation. This ruling set a precedent and further strengthened UAE's as a safe business hub. 

    Indian Perspective 

    Trademark rights are exclusive in nature, and this exclusivity is recognized by the Trademarks Act of 1999. Unlike several other jurisdictions, India has adopted specific regulations regarding exhaustion of rights on a national level; however, the same is not identified for international exhaustion. Section 30 of the Trademark Act affirms the aforementioned. The provisions enumerated under Section 30 lay down that an owner of a registered trademark may oppose further dealings of goods provided a legitimate reason exists in that regard.  

    The concept of international and national exhaustion was disputed in the case of Kapil Wadhwa vs. Samsung Electronics before the Delhi High Court. In the aforementioned case, the main issue was whether international exhaustion recognized by the Act. The defendant herein was an authorized dealer of Samsung products; however, it was argued by the plaintiff that the defendant failed to follow the norms that were set by them regarding pricing and the defendant was selling legitimate Samsung products at a price lower than the standard price set. To which the defendant argued that the sale of genuine products does not amount to infringement under Section 30

    The judges in the matter held that the defendant should be restrained from importing products from other countries and displaying the same in their shop. It was further held that, if any product is being imported from another country and being sold in the domestic market, the shop owner must clearly display the same therein. In favor of the plaintiff, it was held that they are not entitled to give any warranty with regards to such products that have been imported and the duty to provide the consumer with a warranty lay solely on the defendant. 

    Conclusion 

    Parallel imports have significance in both the legal and economic sphere. The legal connotation establishes that the goodwill of a trademark holder shall not be compromised by causing deception and confusion in the minds of the consumers. However, the economic aspect of parallel imports promotes the availability of goods across borders and in turn, prevents the possibility of monopoly over a certain market. 

    Therefore, parallel imports have both positive and negative ramifications depending on the perspective adopted. The consumers face the positive impacts wherein they are able to buy goods at lower prices, whereas, the trade owners face the negatives, with regards to losing integrity and credibility of their brand. 

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    Sat, 17 Oct 2020 11:54:00 GMT
    <![CDATA[Challenging Expert Appointment in the UAE]]> Challenging Expert Appointment in the UAE

    The appointment of an expert in UAE (United Arab Emirates) can be challenged on the basis that the expert failed to carry out his duties in an impartial manner or without prejudice to either one of the parties. The expert appointed has to at all times exercise impartiality towards the parties in a dispute and has to act independently. An expert is defined as any legal person who practices the profession of expertise and is registered on the list recorded in the experts' register in the Ministry of Justice of UAE under the Federal Law Number 7/2012 on the Regulation of Expertise before the Judicial Authorities (the "Law"). The expert appointed has to at all times exercise impartiality towards the parties in a dispute and has to act independently. There are certain conditions that the expert has to abide by at all times, and any failure of the expert in performing these duties shall render the expert's decision to be challenged. These conditions that the expert has to conform to have been mandated under Article 11 of the Law and have been outlined below:  

  • The expert is to practice his profession with utmost honesty, sincerity and accuracy. It is to be practiced in a manner that is prudent whilst preserving its dignity and consideration. It is also imperative for an expert to take into account the principles and traditions of the profession in accordance with the Charter which lays down the set of rules and regulations governing the work of the expert;
  • The expert shall be banked upon to handle the task entrusted to him personally and independently;
  • The expert shall not indulge in any disclosure of information pertaining to his professional expertise work or anything that he may have accessed by virtue of his work of expertise;
  • Neither the expert nor any one of his relatives (up to the fourth degree of kinship) are to have any personal interest either directly or indirectly in any business related to the subject of the case or the subject of his expertise;
  • The employer of the expert shall not be a party to the dispute being considered by the expert;
  • The expert should not accept any work of expertise in a dispute for which he has already been asked for consultancy or where he has been briefed on the documents related to the dispute by any party to the conflict;
  • He has to update and develop his skills in the field of specialization in which he is licensed to practice the expertise;
  • He has to associate his name, registration number and the name of the office through which he works in all publications, correspondences, certificates and reports signed by him;
  • Maintain a special register where data of expertise work performed by him shall be recorded;
  • Maintain a true copy of the reports prepared by him till the adjudication of a conclusive judgment regarding the case subjected to his work of expertise and
  • The expert has to notify the Ministry of Justice of his address and any modification that might occur within a month of the respective modification. Any amendment or modification to the license data will also have to be notified to the Ministry within a month of the said notification.
  • In order to challenge the appointment of an expert, a committee shall be set up by a decision of the Minister of the Ministry of Justice, known as the "Experts Affairs Committee" and this committee shall be competent in reviewing complaints and reports related to the experts. The committee shall be equipped to take any necessary action in accordance with the procedure as specified by the Law and also in accordance with implementing regulations and decisions of the committee. The name of the expert can be struck off from the list upon a decision of the committee in case he loses a requirement of his registration, if he is convicted of a felony or misdemeanor inclusive of a breach of trust/honor and if he is incompetent or unable to perform his work any longer due of his health condition based on the report of the competent medical committee (Article 23 of the Law). The Public Prosecution shall notify the committee of the penal cases filed against the experts and of the judgments convicting them and the committee shall in furtherance of this notify the expert and the party for which he works of the complaint filed against him. The expert shall have a time period of 15 days to respond from the date of receiving such notification. Accordingly, the complaint, along with the expert's response, shall be submitted to the committee upon which a decision can be rendered to dismiss it or refer it further to the investigation.

    Federal Law number 10/1992 on Evidence in Civil and Commercial Transactions (Evidence Law) authorizes the court for the appointment of one or more experts where it deems fit in matters related to a dispute. Whenever deemed to be necessary, the court is authorized to deputize one or more experts from amongst the State employees or from the experts registered on the list to give their advice in matters related to the dispute concerned (Article 69 of the Evidence Law). If either of the parties to the legal dispute is not content with the appointment of the expert or the legal action, then they may lodge a complaint against the estimate within a prescribed time period of 8 days of it being announced. Such a complaint shall be carried forward with a deposition of a written report with the court's record clerk which shall result in the order of estimation not being carried out. However, the said complaint shall be ruled on by another judge or another circuit upon hearing the statements of complainants and the ruling rendered in such matter shall be final and irrevocable (Article 91 of the Evidence Law).

    In case the parties are not content with the appointment of an expert then the parties to a dispute shall have the right to apply for dismissal if such an expert based on the conditions mandated in Article 77 of the Evidence Law. Such conditions include the scenario where the parties may apply for removal of the expert if it appears that he is incapable of performing his assignment without bias. If it is shown that the expert is a relative or in-law to either of the parties in the legal action up to the fourth degree, then the expert's appointment may be challenged. He should also not be a trustee or guardian, be working for any of the litigants or be appointed as an attorney for either party in his personal work. If the expert or his wife is involved in an existing dispute with any of the parties in the lawsuit, unless such dispute has arisen after the appointment of the expert for the purpose of having him dismissed, then the expert's appointment holds ground for being contested. The appeal for dismissal of the expert shall be made by appearing before the court within a time period of one week of the date of his appointment if the order has been issued in the presence of the party who applies for such dismissal. If such an order has been issued in his absence, then the appeal for dismissal shall be submitted within the next week following the service of the order upon him. The right to appeal for dismissal shall not elapse on the basis of reasons arising after such time has been given or if the litigant has produced a proof that he has no knowledge of such reasons except after the lapse of the time given. The reports of the expert can be challenged by the court where the court decides not to follow such report provided that the judge specifically provides reasons for such decision.

     

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    Wed, 05 Aug 2020 15:42:00 GMT
    <![CDATA[The Power to Appeal]]> Appealing Power: The Power to Appeal

    Power and responsibility go hand in hand. The power to appeal renders the responsibility to seek justice, and the public prosecutors have been entrusted with such powers to seek appeals in certain civil and criminal matters in the United Arab Emirates (UAE). The courts in the UAE, set out clearly, a hierarchy of levels establishing the different degrees of courts. The hierarchy of courts can be seen to be set out like the levels in a pyramid. The courts of first instance occupy the base level in the hierarchy of courts. As one goes higher to the next level, the courts of appeal come in on the second level. Moving on to the next level, the Federal Supreme Court is at the federal level, and the Court of Cassation is at the local level of the emirates which have independent judicial departments. In this article, I aim to bring to light the power of appeals by public prosecutors with respect to civil and criminal procedural matters in the territory of the UAE.

    The power to appeal against a judgment passed by the courts in Dubai in civil matters is entrusted with the attorney general and in criminal matters with the public prosecutor. The court of cassation in Dubai is the highest degree of court and consistent with the provisions laid out in Article 173 of Federal law number 11/1992 (as amended) (Civil Procedural Law), appeals to the court of cassation must be filed within 60 days from the date of the judgment passed by the court of appeal. If the litigants in the dispute are unsatisfied with the decision rendered by a court, then the parties may file an appeal on the subject of law alone. The following conditions need to be satisfied for an appeal by the litigants to be accepted by the court of cassation:

  • The appeal has to filed by the litigants in dispute within 60 days of the judgment by the court of appeal, and in cases of emergency within ten days from date of the judgment;
  • The value of the claim in a civil action should be a minimum of AED 200,000 or above. For an appeal with criminal action, there is no such minimum value; 
  • A violation or breach of the law;
  • Error in the application or interpretation of the law;
  • The court did not hold jurisdiction for the particular case;
  • The decision was rendered inadequately or on lack of reasons;
  • The judgments of the court of cassation are final and binding. Despite the above limitations, the attorney general has the power to file an appeal in the court of cassation against any final judgment irrespective of which court issued the decision within one year from the date of issuance of the judgment (Article 174 of Civil Procedural Code). Pursuant to Article 256 of the Federal Law Number 35/1992 (as amended) (the Criminal Procedural law) in the UAE, the public prosecutor has the right to challenge a judgment regardless of the court rendering it, and there is no time limit for making such appeal. However, the following conditions need to be satisfied with respect to filing an appeal by the attorney general in civil matters and the public prosecutor in criminal matters in the court of cassation of Dubai:

  • Judgment is rendered on a breach or violation of law
  • An error in the application or interpretation of the law
  • Where the parties to the dispute do not fit the grounds to make an appeal
  • Filing an appeal in a personal capacity and not on behalf of the litigants in the dispute
  • Law of limitation stops the parties from filing such an appeal
  • The court has rejected an appeal by the parties
  • The parties have surrendered the rights to file an appeal
  • The court of cassation has the authority to hear appeals against the decisions rendered by the courts of appeal. Judgments rendered by the court of cassation are final, conclusive and binding on both the parties of the dispute and are not subject to appeal. The public prosecutor has the authority to file an appeal in a civil action, even after the time limit has lapsed provided it is done within a period of one year from the date of the issuance of the judgment. This includes filing a claim after the lapse of the prescribed time period provided for raising such a claim, filing of the case in the wrong jurisdiction or violating the procedure of the law where the minimum requirement for a dispute in terms of money has to be met. Where a judgment has been achieved based on misrepresentation of the words of law or by the violation of a law, then such judgment can be said to be defective, and an appeal can be filed against such a judgment. In such a case, where the error renders the judgment to be defective, the attorney general shall have the power to appeal against this judgment. The following three conditions need to be satisfied:

  • Violation of the law;
  • Error in the application of the law; and
  • Error in the interpretation of the law
  • The attorney general has the authority to appeal against any judgment if it has been passed in violation of the law, if there is an error in the application or if there is an inaccuracy in the interpretation of the law (Dubai court of cassation in appeal number 2015/462).  This includes where the judiciary has established the legal basis wrongly, where it does not meet the conditions for its application, such as filing a case in the wrong jurisdiction and where an error was caused affecting the judgment.

    A court of first instance is the first degree in the hierarchy of courts in UAE. Such courts have the jurisdiction to hear all matters related to civil, commercial, administrative, labor and personal status lawsuits. If any party is unsatisfied with the final decision of the courts of first instance, then such parties can appeal in the court of appeal which is the second degree of litigation in the hierarchy of courts in UAE. There is a statute of limitation imposed where the time limit for filing such an appeal against the judgment of the court of first instance will have to be filed after the passing of 30 days unless otherwise provided and in the matters of urgency such an appeal could be heard after a lapse of 10 days from the day of the judgment being rendered.

    Case Analysis

    This article aims to discuss the different scenarios where the attorney general and public prosecutors filed an appeal and whether such an appeal was accepted or not. 

  • The attorney general has the power to make an appeal against the final judgments rendered by courts in civil matters (provided it is done within the prescribed limit) and not against the final decisions of the committee of the appeals department in the center for lease dispute resolution. Center for lease dispute resolution in the emirate of Dubai by Decree Number 26/2013 is the authority to adjudicate all rental disputes arising. Article 14 of this decree mandates that all decisions passed by the appeal's department committee at the centre are final and cannot be contested by any appeal. In this particular matter, there was a rental dispute between a lessor and a tenant. The attorney general appealed against the decision of the appeal's committee at the center. It was held that Article 14 holds the decisions of the committee to be conclusive and binding and that nowhere does it mention in the decree that the attorney general holds power to appeal against the decisions of the committee. The court held that such an appeal was not valid and it was not within the powers of the attorney general to file an appeal against the decisions of the committee (Dubai Court of cassation in appeal number 2015/129). The attorney general does not hold power to file an appeal against the final decisions of the independent committees and bodies unless the text of such independent committees states the same.
  • In cases of private courts, committees and where independent bodies have been set up, the law of such bodies and courts need to mention that the attorney general will have the authority to contest an appeal against the decisions of such bodies. Otherwise, the attorney general will have no authority to appeal against the decisions of such private courts or committees. In the present matter, there was a dispute regarding an insurance claim in the regular courts of Dubai formed under the law on the formation of courts in the emirate of Dubai (Law number 3/1992). It was concluded that the attorney general should be restricted to the final rulings by the regular courts under this law and the special courts or special judicial committees of the same law unless a special provision is added allowing the attorney general to have the authority to file such an appeal against the decisions of such regular and special courts/committees (Dubai Court of cassation in appeal number 2014/411).
  • The public prosecutor has the right to appeal in the interest of law where there is an error or violation of the law; however, such an appeal shall accept such an appeal, if the object of the appeal is not at the heart of the law. The court of cassation did not accept the appeal in the present matter, as the claim of the appeal by the attorney general that was shown to be in the interest of law was not at the heart of the law.
  • The parties to a dispute are not entitled to appeal against the judgment of the court if the prescribed time period for raising such a claim has lapsed. In the present matter, the public prosecutor was one of the parties in the matter. The litigants in a dispute are not allowed to file an appeal against the judgment of the court after the prescribed time period for raising such a claim has lapsed. However, an exception to this was made in this particular case as the public prosecutor instituted the appeal not as a litigant in the matter, but in his personal capacity to file an appeal within the time period of one year from the issuance of the judgment consistent with the provisions set out in Article 174 of the Civil Procedural Code of UAE (Dubai court of cassation in appeal number 2008/89). This holds an exception to the rule for all parties in a dispute not to have the authority to file an appeal after the limitation period has expired, but where one of the parties being the public prosecutor can file an appeal in his personal capacity pursuant to Article 174.
  • It has been established that the public prosecutor has the authority to appeal against final judgments of courts provided it is done within the allocated time frame of 1 year from the date of issuance of the judgment. If the public prosecutor makes such an appeal after the lapse of 1 year, then such an appeal shall not be accepted. However, in the present matter, the opposite of this was decided. The court of cassation accepted the appeal of the public prosecutor even after the lapse of 1 year, stating that the time period of 1 year was to be counted from the date of the appeal of the judgment and not from the date of the original verdict issued (Dubai court of cassation in appeal number 2000/211). In the present matter, an appeal by one of the parties had been submitted to the court of cassation which the court rejected. Following this, the public prosecutor made an appeal in the court of cassation. The court held that the time period of 1 year should be counted from the date of the issuance of the final ruling of the subject of the appeal. This raises a concern as the courts have the discretion to decide whether such an appeal by the public prosecutor will be accepted or not depending on the varying circumstances of the case.

  •  

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    Fri, 08 May 2020 11:29:00 GMT
    <![CDATA[Mutual Fund Regulations]]> Mutual Fund Regulations

    For years, it has been pointed out that the majority of funds underperform the market. But not all of them! Well-chosen funds can provide quick and easy exposure to the market's various sectors and industries, lending the portfolio the kind of diversification that can help insulate one from damages during turbulent times. No single piece of faulty corporate news is likely to sink the fund, as it might an individual stock. Not for nothing are mutual funds the investment vehicle of choice for so many. The funds are convenient, cost-effective, and a lot less risky than individual stocks. For the people who have things to do other than check their stocks every five minutes, mutual funds provide peace of mind alternative (or, oh well, supplement). Indeed, for serious long-term investors, mutual funds are just about the perfect investment vehicle. Due to mutual funds and retirement accounts, many Americans have become players on Wall Street.  

    Mutual Funds in UAE 

    The UAE has embarked on an ambitious undertaking by introducing novel business amicable mutual funds regulations to promote the UAE funds industry and provide the foundation for a more developed regional funds regime in the Gulf Cooperation Council. The mutual fund's industry facilitates the gathering of monies for investment in various sectors across the Middle Eastern through funds established in the UAE, in addition to foreign funds registered and promoted in the jurisdiction. One eminent development is the issuance of the Emirates Securities and Commodities Authority (SCA) Board of Directors' Chairman Decision No. (9/RM) of 2016 Concerning the Regulations as to Mutual Funds (Fund Regulations), replaces SCA Board Resolution No. 37 of 2012 Concerning the Rules of Investment Funds, as amended. The Fund Regulations became effective on 31 July 2016. The Fund Regulations continue to ensure-   

  • overseeing the regulation, marketing and licensing of investment funds in the UAE to remain with the SCA. The SCA carries out prudential supervision tasks relevant to the financial position of mutual funds established and licensed as per the provisions of the Fund Regulations;   
  • Approval by the SCA is a requisite to establish a local investment fund- an investment fund established in UAE, excluding the free zones, licensed by SCA;   
  • SCA approval is also a requisite for the promotion and marketing of foreign funds to investors in the UAE. The Fund Regulations define a foreign fund as 'a mutual fund established outside the UAE, in a free zone, or a financial free zone within the UAE'; and   
  • appointment of a UAE-licensed local promoter is a requisite for the marketing of foreign fund to investors in the UAE 
  • The Fund Regulations do not apply to:  

  • Accumulation of funds for (a) investment in a joint bank account, (b) concluding group insurance contracts, or (c) participation in social security, employee incentive programme or investment plans associated with insurance contracts unless such collected money or investments are directed from such plans to mutual funds;  
  • Funds established by a federal or local government agency, the companies wholly owned by any of them as well as the foreign funds promoted to one of such entities.   
  • In the case of reverse solicitation.   
  • The Fund Regulations provide that no foreign fund may be marketed, advertised, distributed or offered within the UAE prior to obtaining the approval from the SCA and appointing a local promoter. However, the Fund Regulations fail to mention, who is eligible to be a local promoter? What are the obligations of the local promoter? What is the minimum subscription per single investor?  

    The Fund Regulations provide that the term of the SCA approval shall be one year. The term may be renewed by submitting an application to the SCA at least one month prior to expiry. However, the SCA shall have the right to reject the application for renewal as required by the public interest.   

    Public Funds versus Private Funds  

    The Fund Regulations apply to both private and public placements. A contrast is made between public funds, open-ended or close-ended funds established in the UAE targeting all investors, and private funds, open-ended or close-ended funds established in the UAE targeting qualified investors.  

    Application for the license of a public open-ended mutual fund is required to be submitted either by its founders or a corporate entity licensed by the SCA to practice the activity of establishing and managing a similar fund in the UAE. The Fund Regulations provide for the submission of a prospectus, with supporting documents and a key investor information document. Prior to obtaining SCA's approval for the licensing and announcement, it is prohibited to announce the start of initial procedures to obtain a license for a fund, announce its licensing, promote it, subscribe in its units, distribute any promotional materials or announce any information concerning the fund. The term of the license for the fund is one year, and may further be renewed. Similar to open-ended public funds, the scope of investment in public close-ended funds include high-liquid non-tradable securities and tradable securities (stocks, bonds and cash instruments). The scope also includes financial derivatives on tradable securities to control the level of risks outlined in the prospectus or for hedging in an amount not higher than the total net asset value subject to disclosure thereof, declared indexes and bank deposits to ensure liquidity with a maturity of maximum 12 months with licensed banks, subject to determining the investment ratio.   

    Restrictions for Public close-ended mutual funds:  

  • The ratio of the investment in securities issued by an entity shall not exceed 10 per cent of the issued capital or 10 percent of the net value of the fund's assets (whichever is lesser).   
  • The ratio of investment in unlisted securities shall not exceed 10 percent of the fund's net asset value.   
  • The ratio of investment shall not exceed 20 percent of the fund's net asset value in securities that are listed in a foreign market, provided that the market is subject to a regulator similar in operations to SCA.  
  • Investment in the financial derivatives is subject to a maximum of 1 percent of the net asset value of the fund.   
  • Investment in a different mutual fund is not permitted unless the fund is in a manner that serves the interests of the unitholders and is consistent with the investment policy of the fund and 
  • Engaging in foreign exchange operations is permitted provided, they are incidental and to manage its investments.   
  • The Fund Regulations make provision for various types of mutual funds:  

  • Master fund- a public mutual fund or part of a group of funds affiliated to an umbrella fund, provided the master fund meets specific criteria;   
  • Feeder fund- Public mutual fund or part of a group of funds affiliated to an umbrella fund which is excluded from investing in tradable securities and from other investments as determined by the SCA, and also invests a minimum of 85 percent of its assets in the units of a public foreign fund or a public master fund; and   
  • Umbrella fund.   
  • Promoting the Funds  

    The SCA issued Chairman of the SCA Board of Directors' Decision No. 3/RM of 2017 Concerning the Regulation of Promotion and Introduction (Promotion Regulations) in January 2017. The Promotion Regulations do not set forth that they substitute the Fund Regulations either wholly or in part and in fact appear to supplement those sections of the Fund Regulations that relate to promoting foreign funds. How so? Well, the Promotion Regulations reconfirm that the marketing of interests in foreign funds to investors in the UAE mandates that such interests be registered with the SCA. Also, the Promotion Regulations reiterate that reverse solicitations set out in the Fund Regulations are applicable.   

    The Promotion Regulations specify a further exemption. When a foreign fund is offered to a qualified investor, the SCA-licensed promoter does not have to market it by way of a private offering in the UAE.

    Who is considered as a qualified investor?   

    A qualified investor is:  

    I. An investor who is capable of managing investments by itself and on its own accord, such as:   

  • The federal and local governments, government institutions and authorities, or the companies wholly owned by any of the aforementioned;   
  • International bodies and organizations;   
  • Individual licensed to engage in any commercial business in the UAE provided that investment is one of the purposes of its business; or   
  • A natural person with an annual income of minimum AED 1 million, or his net equity, with the exception of his residence, valued at AED 5 million and a declaration that he has the adequate knowledge and experience whether solely or through a financial consultant, to assess the offering documents, the risks and advantages associated with or arising from the investment; and   
  • II. represented by an investment manager licensed by the SCA.  

    Various new SCA regulations relating to funds had been enacted between 2016 and 2018. While the Administrative Decision No. 57/RT of 2017 deals with the Adjustment of Positions Mechanisms for Mutual Funds, Chairman of the Authority's Board of Directors' Decision No. 10/RM of 2016 incorporates the Fees of Mutual Funds, outlining the fees payable to the SCA in respect of application fees and license renewals for public and private mutual funds.  

     

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    Sun, 03 May 2020 07:20:00 GMT
    <![CDATA[Short Selling Provisions in EU]]> Short Selling Provisions in European Union

    A curious story emerged on 11 April 2017 when a man was charged with planting a bomb under the Borussia Dortmund football club team bus in April. It was initially suspected to be the work of terrorists but the truth was actually much stranger-it was a short seller. The man, a 28-year old known only as Sergei W, set the bomb to profit from 15,000 put options he had purchased in anticipation of the club's share price slumping post-attack. Ironically, the damage from the bomb was shrugged off in the financial markets. The club's shares fell further after Dortmund had been eliminated from the Champion's League the week after the attack then on that particular day. This odd tale might confirm the nefarious reputation that many short sellers have in the public eye. 

    The financial crisis in 2008 initiated a global recession which eventually, but only partly contributed to the sovereign debt crisis in the Eurozone. It was argued in the Liikanen Report of 2012 that these events should provide an impetus for the legislative reforms concerning the financial and capital markets in the European Union. The group further emphasized that even though the reforms are, by nature, pre-emptive, the aim shall be to provide authorities with tools that would effectively control the market disorders prevalent today. The distinctive objective is to create a market infrastructure in which the efficient capital allocation would not be suppressed, and in which systemic risks could be monitored and managed properly to protect the economic stability of the Member States. In consequence, the European Commission had proposed about 30 sets of rules since 2010 regarding the common financial and capital markets in the European Union (EU). The most essential of the reforms includes the implementation of Basel 3 framework into the EU banking regulation (CRD IV). Others that furthered global collaboration int his regard include the European Market Infrastructure Regulation (EU) No 648/2012 and Alternative Investment Fund Managers Directive (2011/61/EU), which provide comprehensive rules for over-the-counter derivatives trading and the business activity conducted by the property, private equity, commodity, and hedge funds. As Dobravolskas and Seiranov in 2011 address, the "regulatory reforms are reaction to market failures" and the evolution of regulation can be comprehended as a long regulatory cycle where "periods of tightened regulation are changed with lax regulation or deregulation". Quite interestingly, the previous financial markets regulatory cycle in the EU from 1999 to 2004 also addressed issues such as supervision, supranational regulation and harmonized frameworks (Quaglia 2007), but was unable to provide sufficient systemic resiliency against the upcoming meltdown in 2008.  

    In the immediate aftermath of Lehman Brothers' collapse both the United States (US) Securities and Exchange Commission and the regulatory body of the United Kingdom (UK), the Financial Services Authority had temporarily banned short selling to protect the markets and reduce downward pressure on prices. The ban covered 29 financial stocks in the London Stock Exchange and eventually over 900 stocks in the US. Subsequently, 24 other countries enforced varying constraints on short-selling between September and October in 2008. Following the diversified measures by regulatory bodies, it was reported that market participants had been negatively affected by the numerous and varying rulebooks across market places, while inversely, other, usually larger institutional market participants benefitted from regulatory arbitrage. The report formed the basis for the legislative process that would eventually lead to the introduction of Regulation (EU) No 236/2012 on Short Selling and Certain Aspects of Credit Default Swaps, which became fully applicable on 1 November 2012. 

     

    Regulation is aimed to achieve the following:

    I. increasing the transparency of short positions,

    II. reducing settlement risk and other risks linked with uncovered or naked short selling,

    III. reducing risks to the stability of sovereign debt markets posed by uncovered (naked) Credit Default Swaps (CDS) positions, while providing for the temporary suspension of restrictions where sovereign debt markets are not functioning properly,

    IV. ensuring that the competent authorities have clear powers to intervene in exceptional situations to reduce systemic risks and risks to financial stability and market confidence arising from short selling and credit default swaps,

    V. ensuring coordination between the Member States and the European Securities and Markets Authority (ESMA) in exceptional situations.

    The short-selling regulation consists of Regulation (EU) No. 236/2012 as well as the Implementing Regulations and Delegated regulations that implement the so-called technical standards. Technical standards regarding the further implementation of short-selling regulation are represented by either the  RTS (Regulatory technical standards) or ITS (Implementing technical standards). The short-selling regulation has four technical standards, Implementing Regulation (EU) 827/2012 and delegated regulations- (EU) 826/2012, (EU) 918/2012 and (EU) 919/2012. A new framework regarding short-selling of financial instruments and transactions in credit default swaps was introduced with the short selling regulation. The regulation requires holders of net short positions in shares or sovereign debt to make notifications once certain thresholds have been breached. It also outlines further restrictions on investors entering into uncovered short positions in shares or sovereign debt.

    The practice of short selling under the new regulatory regime is the prohibition of naked short selling. According to Preamble 18 of the Regulation the "uncovered short-selling of shares and sovereign debt is sometimes viewed as increasing the potential risk of settlement failure and volatility", and to reduce such risks "it is appropriate to place proportionate restrictions on uncovered short selling of such instruments". In consequence, the Regulation mandates either the borrowing, or the arrangement of the borrowing with a third party that confirms that the securities have been located before entering into a short position. Thus, prohibition of naked positions applies equally to equity and sovereign debt instruments. Concerns regarding the stability of sovereign debt markets on one hand and the excessive sovereign debt of certain member states on the other have been highlighted since the escalation of the European debt crisis. Due to the possible adverse impact on debt market stability, regulation now prohibits purchasing credit default swaps without having a long position in underlying sovereign debt instrument. Thus, sovereign credit default swaps shall be based on the insurable interest principle; the only legitimate reason to enter into a CDS contract is to hedge against the default risk of the issuer, which naturally requires ownership in the underlying security. Conversely, should a natural or a legal person buy a credit default swap without purchasing the underlying debt instrument first, it would be in his best interest that the issuer defaults. Further practical change is the obligation to report and disclose significant net short positions to national competent authorities (NCA) and the public, respectively. Apart from exemptions granted for market makers and authorized primary dealers, the reporting requirement applies to every market participant, but for a predefined threshold, i.e. if a significant net short position in shares equals or exceeds 0.2 percent of issued share capital. Notification obligation further applies to every 0.1 per cent change above the threshold. Notification must be made public if the net short position in shares exceeds 0.5 percent of the issued share capital of a company and for each 0.1 percent above that. Notifications must be made privately or in public when a net short position falls below the aforementioned limits.

    Notification must be made to the competent authorities when net short positions in sovereign debt instruments exceed or falls below certain limits. Where the total amount of outstanding debt of a state is in the range of 0 to 500 billion euros, the notification limit is 0.1 percent. Where the total amount of outstanding debt of a state is over 500 billion euros or where there is a market with futures for the issued sovereign debt instruments of that State, and the market is considered liquid, the notification limit is 0.5 percent. Notification must be made each time the net short position is increased by 0.05 percent above the 0.1 percent level and when the net short position is increased by 0.25 percent above the 0.5 percent level. The threshold for Iceland is 0.1 percent.

    The purpose of the reporting obligation is twofold. First, it enables ESMA to monitor market moves in general and large positions in particular, and in consequence manage risks that dwell within. Secondly, NCAs are required to disclose reported net short positions in shares in a comprehensive and easily accessible manner, which shall be expected to contribute to more transparent market fluctuations. The disclosure threshold is set at 0.5 percent of issued share capital, and each 0.1 percent move above the initial threshold, also is further disclosed. Authorities should disclose more detailed and timely information on short positions as it provides more accurate picture of the market sentiment, thus increasing the pricing efficiency. Based on trading data from 913 Nasdaq-listed stocks, it was concluded that short sellers are information-oriented traders, the results showed that abnormal short-selling activity before the earnings announcement was significantly linked with the stock price reaction after the earnings went public, indicating a positive relationship between overvalued stocks and short sale volume. The Regulation also provides NCAs with an authorization to enforce temporary bans or introduce other constraints of similar effect, provided it notifies ESMA beforehand, which then coordinates and implements the proposed measures. However, according to Article 28(1), ESMA is permitted to disregard any NCA and directly order emergency measures and conduct direct operational decisions anywhere in the European Economic Area. Intervention may only take place, however, if market conditions favor taking measures. Such conditions pose an apparent threat to the functionality of financial markets or to the stability of the whole or part of the financial system in the Union ("cross-border implications"). Interestingly, the European Court of Justice (ECJ) rejected the UK's lawsuit in January 2014. In the case United Kingdom of Great Britain and Northern Ireland v. Council of the European Union, European Parliament", the UK argued that emergency powers handed to ESMA were illegal and that constraints on short-selling harm market efficiency. The ECJ ruled that the new powers were compatible with EU law, dismissing the legal case in its entirety.

    The legal mandate for the competent authority to prohibit or impose conditions to natural or legal persons entering into a short sale is provided in Article 20(2). Measures are further applicable to transactions concerning all financial instruments and transactions other than short sales, provided the pursued effect of the transaction is to confer a financial advantage in the event of a decrease in price or value of another financial instrument. Under Article 20(1)(a), the definition of exceptional circumstances is proportional to the market preconditions that include adverse events or developments which constitute a serious threat to financial stability or market confidence in one or more Member States. Article 24(1) of Commission Delegated Regulation (EU) No 918/2012 supplements the Regulation with specific characteristics of adverse events and developments. They include any act, result, fact, or event that is or could reasonably be expected to cause serious financial, monetary or budgetary problems which may lead to financial instability concerning a Member State or a bank and other financial institutions deemed important to the global financial system; a rating action or a default by any Member State or banks and other financial institutions deemed important to the global financial system that causes or could reasonably be expected to cause severe uncertainty about their solvency; substantial selling pressures or unusual volatility causing significant downward spirals in any financial instrument related to any banks and other financial institutions and sovereign issuers deemed important to the global financial system; any relevant damage to the physical structures of important financial issuers, market infrastructures, clearing and settlement systems, and supervisors which may adversely affect markets in particular where such damage results from a natural disaster or terrorist attack; and any relevant disruption in any payment system or settlement process, in particular when it is related to interbank operations, that causes or may cause significant payments or settlement failures or delays within the Union payment systems, especially when these may lead to the propagation of financial or economic stress in a bank and other financial institutions deemed important to the global financial system or in a Member State. Lastly, additional consideration should be paid to the violent intraday price changes. Thus, should a price of a financial instrument fall significantly during a single trading day, the national competent authority is handed powers to prohibit or restrict short selling in order to prevent a disorderly decline in the price of the financial instrument (Article 23(1)). A liquid share is determined to experience a significant fall in price when close-to-close return yields, 10 per cent or more. This applies to illiquid shares as well, provided the company is included in the main national equity index and is the underlying for a derivative contract traded in a trading venue. Otherwise a significant decrease in price is defined as 20 per cent or more for a share which price is €0.50 or higher, or the equivalent in the local currency. In all other cases, the daily decrease in value shall be 40 per cent or more to be considered significant. For sovereign and corporate bonds, increases of 7 and 10 per cent in the yield, respectively, are deemed to be significant drops in value (Article 23(2-3)). Quite interestingly, certain market conditions that would be later identified by the Regulation were already broadly taken into account in a public statement ESMA released on 11 August 2011. In it ESMA noted that the European financial markets had been very volatile in the preceding weeks and that the "developments have raised concerns for securities markets regulators across the European Union". The following day Spain, France, Belgium and Italy prohibited short selling with several publicly traded financial and insurance companies. The bans were originally set to last either 15 days or until further notice. Belgium and France lifted the ban on 11 February 2012. France did not validate the decision, but Belgium pointed to the reduced market volatility. Greece had already banned short selling on 9 August 2011. The Greek regulator HCMC made the decision while taking into account the conditions prevailing in the Greek markets. After several extensions, the ban was eventually lifted on 15 July 2013. However, the regulatory bodies in mainland Europe were not the first ones to implicate a relationship between high volatility and short selling. On 19 September 2008, the Securities and Exchange Commission described the market conditions as a period of unusual and extraordinary market volatility, while it appeared that "unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation." A day earlier the Financial Services Authority justified its ban by stating that the measurements would protect and stabilize the markets. The Chief Executive Hector Sants was quoted that "while we still regard short selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets". In 2012, the Australian market authority ASIC remarked that, during the financial crisis, countries around the world took steps to strengthen their financial systems due to the widespread concern that short selling was contributing to market volatility and putting enough pressure on market confidence to be systematically relevant to the global financial system and economy.

    Current Standings:

    EU toughens short-selling rules as markets are hit by the coronavirus. The European Union's market watchdog is ramping up surveillance of hedge funds and other short sellers that may be taking advantage of the market rout caused by the coronavirus outbreak. Temporary measures announced by the European Securities and Markets Authority on 16 March 2020 will force investors to reveal more information about their short-selling positions by halving the threshold for disclosures. The ESMA's new rules, which also apply to the UK under the post-Brexit transition period, mean any short-selling position that accounts for 0.1 percent or more of a company's outstanding shares must be announced to the market, compared with the previous threshold of 0.2 percent.

    The measures, which come into force immediately and will last three months, have been prompted by severe stock market losses that have caused some of the biggest ever one-day falls for indexes such as the FTSE 100. The ESMA said the measures were precautionary and appropriate given that the severe stock market volatility posed a serious threat to market confidence in the EU as short selling can increase price swings and result in larger losses across financial markets. The temporary measures stop short of bans imposed during both the 2011 eurozone credit crisis and the 2008 global financial crash. In 2008, the UK's financial watchdog banned the shorting of 34 domestic stocks including major banks, asset managers and insurers for five months following the collapse of Lehman Brothers. 

    Application of the Short Selling Regulation (SSR) to the UK

    When introduced, the SSR and the delegated regulations applied directly in the UK (and other EU member states) without the need for implementation in national law. Certain aspects of the SSR either afford discretion to national regulators or require those regulators to establish operational procedures to enable matters to be dealt with under national law. In the UK, these additional provisions were implemented by secondary legislation and changes to the UK Financial Conduct Authority (FCA) Handbook.

    The UK withdrew from and ceased to be a member state of the EU on 31 January 2020. The negotiated withdrawal agreement entered into between the UK and the EU provides for a transition period, commencing on 31 January 2020 and ending on 31 December 2020, unless extended (such period, the "transition period"). The withdrawal agreement stipulates that EU law such as the SSR, shall apply to and in the UK during the transition period. The UK also intends to "onshore" the SSR into UK national law, with the UK version of the SSR applying after the end of the transition period.

    The COVID-19 pandemic has resulted in extreme volatility in equity markets across the EU. In response, several market regulators across the EU have taken action, using powers under Article 20 of the SSR to temporarily ban short-selling in certain securities. 

    Austria

    On 18 March 2020, the Austrian Financial Market Authority (FMA) issued a temporary prohibition on short sales of all shares that are admitted to trading on the Regulated Market of the Vienna Stock Exchange. The prohibition will stay in effect for an initial period of one month and started on 18 March 2020. 

    Belgium

    Belgium's Financial Services and Markets Authority (FSMA) announced the temporary prohibition for 17 March 2020, of the short-selling of the shares of 18 issuers admitted to trading on the Belgian Euronext market. 

    France

    The Autorité des Marchés Financiers (AMF), the French financial regulator, issued a temporary prohibition on the short sales concerning the shares of 90 issuers on the Paris exchange, commencing on 17 March 2020. 

    Greece

    The Hellenic Capital Markets Commission (HCMC) issued a temporary prohibition on short-selling of all shares admitted to trading on the regulated market of the Athens Stock Exchange. The measure came into force on 18 March 2020 and will last until 24 April 2020. 

    Italy

    The temporary measure by the Commissione Nazionale per le Società e la Borsa (CONSOB), the Italian regulator, prohibits short selling applies to all the traded shares on the Italian regulated market, from 18 March 2020 until 18 June 2020. 

    Spain

    The Comisión Nacional del Mercado de Valores (CNMV) has issued a temporary prohibition on short-selling of shares of equities admitted to trading on all Spanish trading venues (the Madrid, Barcelona, Valencia and Bilbao Exchanges, and the Mercado Alternativo Bursátil), lasting for an initial period of one month, from 17 March 2020 until 17 April 2020. 

    ESMA

    Under Article 27 of the SSR, within 24 hours of receiving a notification of a short-selling prohibition from a national regulator, ESMA is required to issue an opinion on whether it considers the measure, or proposed measure, necessary to address the exceptional circumstances identified by the national regulator. The ESMA has issued a positive opinion in respect of all of the prohibitions described above.

    The UK Position

    The FCA issued a statement (FCA Statement) on these short-selling prohibitions on 17 March 2020. The FCA noted that when considering whether to use its short-selling powers following action by another EU regulator, its standard policy has been to assist that regulator in enforcing the prohibition. The FCA further noted, however, that it has never used the relevant banning powers given to it under the SSR and that while it would not rule out such action in exceptional circumstances, it sets a high bar for imposing such a measure. On 23 March 2020, the FCA issued a further statement on short-selling, providing more detail on why it has not introduced a short-selling ban to date:

    "The FCA continues closely to monitor market activity, including short-selling activity. Aggregate net short-selling activity reported to FCA is low as a percentage of total market activity and has decreased in recent days. It will continue to fluctuate, but there is no evidence that short selling has been the driver of recent market falls. A great many investment and risk management strategies rely on the ability to take 'long' and 'short' positions. These benefit a wide range of ordinary investors including the pension funds for employees of companies and local government. We also note that short selling is a critical underpinning of liquidity provision. The loss of these benefits would need to be carefully balanced before determining that any intervention to prevent short selling was appropriate."

    The new threshold reporting obligations apply to any natural or legal person, irrespective of their country of residence. They do not apply to shares admitted to trading on a European Economic Area (EEA) or UK regulated market where the principal venue for the trading of the shares is located in a third country, or to market making or stabilization activities. The FCA Statement indicated that it will apply this temporary change to the reporting thresholds, but that this would involve changes to its systems. Until the FCA has made these changes, it has indicated that it expects firms providing reports in respect of UK listed shares to use the previous, 0.2 percent threshold.

    Conclusion

    There was widespread criticism of short sellers in the wake of the 2008 financial crisis, when certain investors were accused of deliberately undermining confidence in banking shares, fueling the global market instability. The regulator has had its hand strengthened by the continued critical voices around the world. Despite the already stringent rules, participants around the globe have been asking for further tightening. In June 2017, Tom Farley, head of the New York Stock Exchange, said that short sellers should be forced to reveal more of their activities and called the practice of short selling "icky and un-American."

     

     

     

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    Thu, 16 Apr 2020 08:08:00 GMT
    <![CDATA[Side Agreements in UAE]]> Validity of Side Agreements in the United Arab Emirates

    A side letter or a side agreement is an agreement that is not part of the primary contract or agreement but is an ancillary to the primary contract. A side agreement is used by parties a contract to confirm additional details that were not known, at the time, when the primary contract was being finalized. A side agreements is used mainly to

    • Clarify certain points mentioned in the primary contract, for example, setting out the steps that a party must take to satisfy an "all reasonable endeavors", an obligation that is not defined in the main document;
    • Supplement points for main contract, or
    • Verify contracts, for instance once the primary contract is drafted and the parties wanted to make changes to the contract, which would result in redrafting the clauses and will be time-consuming. Therefore, it may be easier to set out the amendments in a side agreement.

    Although the general intention under the law of contracts is that a side agreement will give rise to legally enforceable rights and obligations and has the same force as the underlying primary contract. However, this by no means is guaranteed. In some cases, the courts have denied the validity of side agreement and have stated that a side agreement has nothing more than a moral effect. As a result, side agreements should be carefully drafted. Side agreements are often used in commercial contracts, primarily in financial or property transactions. A side agreement is usually in the form of a letter signed by parties signatory to the primary contract. For a side agreement to become binding it must satisfy the same criterion that all contracts have to fulfill, that is there should be an offer, acceptance, consideration, certainty and an intention to create legal relation. A side agreement is a contract for which consideration (payment, in any form, under the contract) must be provided. The condition of consideration is the most important in a side agreement and it does not have to be in monetary form; it can merely be a reciprocal benefit. It is important to note here that in the absence of any benefit or payment, a side agreement can only become legally binding if it is executed as a deed, which means that it must state that the side agreement is a deed and the party's signatures must be witnessed.

    In the United Arab Emirates (UAE), it is common knowledge that many limited liability companies (LLCs) are owned and managed by foreign shareholders, though the legal ownership may reflect differently. Article 10 (1) of the Federal Law No. 2 of 2015 (Company Law), states that

    "With the exception of Partnership Companies and Simple Limited Companies where all the joint partners of any of such companies shall be UAE nationals, any company established in the State shall have one or more UAE partners holding at least 51 per cent of the share capital of the company."

    Which primarily means that UAE nationals shall hold at least 51% of the shares in share capital of an L.L.C and the remaining 49 per cent shares can be held by the foreign investor/s, as sole ownership is only allowed to the local nationals for L.L.C incorporation. In reality, many companies are absolutely owned and managed by foreign shareholders. Even though as per law share of local Emirati has to be a minimum of 51%.

    Given the legal scenario, foreign investors have resorted to side structures to keep their controlling financial interests in their UAE companies. Therefore, it is common practice in the UAE for shareholders to execute "Nominee Shareholder Agreements" (NSA) or "side agreements" between the parties. Under NSA, a UAE national agrees to waive all rights nominally held by the LLC, rights like to receive dividends, to exercise votes in general meetings, and to obtain any proceeds of the sale of the shares. In short, the provisions of the NSA circumvent UAE's company law. NSA or the silent agreement prevents the UAE majority shareholder from taking part in the operations of the LLC, which makes the foreign partner the sole beneficiary and decision-maker of the company.

    As a result of NSA or the silent agreement, the UAE national turns into a silent registered owner of shares or a 'silent partner', while the foreign investor secures all economic interests in such shares. Having a 'sleeping partner' means that the investment in the business concerning the establishment and operation of the company is made entirely by the foreign shareholder and the UAE national shareholder just acts as a 'sponsor'. The UAE national only provides administrative assistance to the company like liaising with the authorities and arranging for the visas. An annual sponsorship fee is therefore agreed upon between the party, which is paid to the sleeping partner. Even though the company's Memorandum Of Association (MOA) and trade license may reflect de jure ownership by the parties, side agreements assist the foreign shareholder in protecting their interests and ensuring that they have control over the company. 

    The legal debate arises regarding the validity and enforceability of these arrangements. When a dispute arises between a foreign investor and the UAE partner, the crucial matter of concern is which agreement the court shall recognize.  Will the Court recognize the MOA, which is officially notarized and registered in the Commercial Register or will the court uphold the side agreement?

    In order to answer this a question, one must take a look at the relevant UAE laws and legislations, which are primarily the UAE Civil Code, the Commercial Company Law, and the Anti-Fronting Law, along with examining the practice of the UAE courts in applying these laws. Article 22 of the old Commercial Companies Law (CCL), has been recently abolished and replaced by Law number 2 for the year 2015. The new law states that the UAE nationals' shares are to be at least 51% of the total shares in any LLC established in the mainland. CCL (Federal Law No. 2 of 2015) Article 29 – Clause 3 which reads as –

    "If it is agreed in a company's Memorandum of Association that one of the partners is to be deprived of the profits or exempted from loss, or to receive a fixed percentage of profits, such Memorandum shall be deemed void."

    A literal interpretation of the provision renders most side agreements illegal and void ab initio. Article 395, of the UAE Civil Code, states that if the contracting parties conceal a true contract with an apparent contract, the true contract will be effective as there has been severe criticism of the contractual setup that clearly compromised the UAE's efforts to involve more domestic operators in its national economy.

    This ensuing debate also led to the enactment of the Federal law called The Anti-Fronting Law, the objective of which is to prohibit side agreements with UAE nationals. Failure to comply with provisions of Anti Fronting Law invites penalty. Under Anti Fronting Law there is also criminal consequences for repeated offences. It is important to note that the sanctions imposed under the Anti-Fronting Law apply to all persons who are parties to such side contracts.

    After reviewing the law with respect to NSA or side agreement, now let's take a look at how the courts in UAE have dealt with the issue. Abu Dhabi Court of Cassation pronounced (in Civil Appeal 30 of 2015) that a UAE national has no rights to claim profits from the company, if he has voluntarily sold his shares in the company. The Court stated that this is because the sale of shares would violate UAE Companies Law and public policy prevalent in the country.

    A recent judgment by the Federal Supreme Court demonstrated a unique position on the issue of side agreements. An action was filed by a UAE shareholder (owning 51 % of the shares as per law), requesting the court for confirmation of his entitlement to 51 % of the profits according to the shareholder's agreement. In response the Omani shareholder (owning 24 % of the shares as per MOA) argued that the partners in the company signed a side agreement and entered into an arrangement whereby the UAE partner would own 37.5 % of the shares, the Omani partner would also have 37.5 %, and the US Company owned 25% as opposed to previous 24 % of the shares. The Federal Supreme Court decided that there was sufficient documented proof to establish the existence of the side agreement as argued by the Omani partner. Upon reviewing all the documents submitted by Omani partner, the court concluded that there is sufficient evidence to establish existence of the side agreement between the parties (and that the shares have been distributed based on 37.5% to the UAE and Omani partners and 25% to the US Company).

    In another judgment the Dubai Court of Cassation confirmed the Courts' of First Instance and Appeal judgments. The court here recognized the side agreement. The court in its ruling stated that:

     […] And whereas the lower courts have observed the above rules and grounded its judgment on: (the documents, particularly the declaration made by the appellant, which was dated later than the date of the MOA of the Company, and in the said declaration the appellant admitted that he had made no contribution to the capital of the company and has no rights in its profits or any of its assets……and the respondents have paid all the capital on behalf of the claimants. Hence all the profits and assets of the company shall belong to the claimants….)

    The practice by the Dubai Court of Cassation in recognizing the side agreement is worth a mention here. The Court acknowledges the side agreement and sets aside the MOA, mainly when such side agreements have been documented in writing. The Court of Cassation has relied heavily on Article 10 of the old Commercial Companies Law (Law number 8 for the year 1984) to decline any attempt to prove anything that is contradicting with what is stated in the MOA unless it is made in writing.

    In Cassation number 77/2010, Commercial Cassation, dated 11th May 2010, the Dubai Court of Cassation stated:

    "…- though the general rule is that it is permissible to use unwritten evidences as a method of proof, as per the provision of sub-clause (1) of Article 35 of the UAE Code of Proof, however the Commercial Companies Law number 8 for the year 1984  made an exception to that general principle, ….,and stated in article 10 of the said law that (testimonies are not admissible to prove what is contradicting the provisions of the MOA)- …- therefore it is impermissible to any of the partners to prove versus any other partner the fictitiousness of any of the provisions of the MOA, unless made in writing…"  (Emphasis added.)

    Therefore, we can say that the Dubai Court of Cassation has made it clear that the only way to prove anything that is in contradiction with the MOA, is by documenting the side agreement in writing. Having said the above it should be noted that it is still safe to rely on the side agreements as the courts are recognizing them as far as they are in writing

    It would be inconsistent with UAE government's business friendly attitude to limit or prohibit side agreements. As it would only deter foreign investers to invest in UAE. Despite the fact that legality and enforceability of side agreements is still in question, these types of arrangements, even though highly intricate in nature are and will continue to be very commonly used in the UAE. However, an option available to improve a foreign minority shareholder's position could be to avoid the problem by establishing a UAE branch of a foreign business rather than a UAE LLC. The branch will require a UAE national agent to be appointed, but the agent will not have any ownership or management rights in the business of the branch.

     

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    Mon, 06 Apr 2020 07:29:00 GMT
    <![CDATA[Due Diligence Foreign Law Firms ]]> Due Diligence by Foreign Law Firms of UAE Entities

    Business transactions around the world often involve mergers, acquisitions or take-overs. Such transactions of the business organizations require thoughtful decisions which ultimately decides the future of the Company. Hence, due diligence holds the key to vital decisions of the economy as to whether the deal should be given a green flag or not.

    UAE as an economic and commercial hub in the Middle East and North Africa (MENA) region, has numerous foreign and domestic investors who are attracted towards the region's incentives like the tax regimes, free zones, etc. operating in the region. While some establish their own ventures, some businesses opt to enjoy the market reputation of the existing operations and employee base of established corporates in the UAE via mergers or acquisitions. Due diligence investigation is a useful tool to analyze the potential benefits and risks of investments. But easier said than done, the legal due diligence of a company is often a tedious task, which can significantly decide the timeline of the transactions.

    In plain terms, legal due diligence is a process through which substantial and reliable information about a business entity to discover any facts, circumstances or legal risks that are likely to influence a business decision. A snapshot of due diligence is depicted below:

    Although due diligence is not mandated by UAE law, it is always recommended to the buying entity that extensive due diligence for actual or constructive liabilities of target entity should be done. Also, legal and regulatory approvals and restrictions on transaction become clear to the purchaser.

    The information of the target company that is of the essence for the purchaser company is presented as follows:

  • Corporate Information
  • Legal entity structure, including name, location and function of all divisions, subsidiaries or related entities
  • Memorandum of Association & Articles of Association (or Constitutive Contract), including all amendments
  • Minutes of all meetings and consent in writing of managers, the board of directors, board committees and other committees and shareholders.
  • Shareholder/Partner (Owner) Information
  • Lists of all existing owners of shares with their address, number of shares they own, dates of issuance of shares and full payment, the consideration received by the Company.
  • List of all options and other rights to acquire equity securities.
  • Material Contracts
  • Debt financings
  • Bank line of credit or loan agreements and guarantees
  • Standard sales or license agreements
  • Indemnification agreements
  • Products, Manufacturing & Competition
  • Copies of any non-competition agreements of the Company with employees and subsidiaries
  • List of the top customers of the Company, indicating the products and the amounts of each purchase.
  • List of service and support contracts
  • Forms of warranties and guarantees provided to customers
  • Litigation & Audits
  • All management letters or individual reports from the auditor and responses to internal accounting controls.
  • Settlement documents
  • Decrees, order and judgments of courts or governmental agencies concerning the Company
  • Employees & Management
  • Management and organization of the company
  • Personnel handbooks and manuals
  • Government Contracts
  • Tenders and Government contracts and assignments
  • Technology and Proprietary Rights
  • All patents and applications pending or held by the Company
  • Copies of the agreement pertaining to confidentiality, non-disclosure, and assignment of invention agreements, between the Company and employees.
  • List of all copyright and trademark registrations and applications of all intellectual property
  • General
  • Report on all actual or potential conflicts of interests that the Company's directors, officers or employees have due to their relationship with any other person or entity which has any interest, financial or otherwise, in the Company
  • List and description of all transactions between the Company and its employees, directors or shareholders.
  • Any other documents which are relevant to the company and the sector in which it is operating as the due diligence and the perusal of documents differs from one domain of operation to another domain. But the above gives a bird's view of the same.

    The basic aim of drafting observations and action points in a due diligence report is to bring out or raise red flag over a gap of information or at the time of a non-compliance or an additional consent etc. required from the third party which was not known till the time it was raised in the due diligence report. Now, when it comes to the drafting of the observations and action points, lawyers need to keep one thing in mind that the due diligence report which is being prepared before a transaction would be discussed amongst or may be referred to a certain class of people who may not be lawyers. They could be read by business people, CEOs, CFOs or board of the company, general counsels, investor's legal advisors, investment managers, etc. Therefore, the correct and the most favoured way of drafting is first to tell the reader what has been provided for review, then your observations and lastly, the consequence of the observation (for, example, if it is a non-compliance, then the consequence of it, such as a penalty, etc.) so that even a non-lawyer could understand the basic requirement of such an observation.

    Action points are stated in the report but at an interim stage for the purpose of internal communication so that the target or investee company representatives can rectify the anomalies. They are often removed in the final report. The due diligence report generally has the following points in it to make a credible document: -

    PROJECT NAME

    SUMMARY OF CONTENTS:

    Transfer of Control

    • Key Commercial Terms

    • Duration of Material Contracts, Penalties, IPRs, etc.

    • Assignment

    • Termination

    • Governing Law/Jurisdiction

  • KYC Details and Background Check
  • It involves identifying the entity such as incorporation certificate, commercial license, shareholders, key directors and media releases.

  • Dubai Chamber of Commerce and Industry
  • The credit ratings and recommended credit limits of the company, besides companies' and financial information, such as shareholders, directors, bankers, payment history, etc.

  • Department of Economic Development (DED) database
  • It provides trade license number of the company, status of activity, expiry date, its activities, and the contact information and location of the company.

  • Al Etihad Credit Bureau (AECB)
  • It is a federal company [AA1] which is mainly a public joint-stock company (PJSC) which is wholly owned by the Federal Government of UAE. As per the Federal Law No. 6 of 2010 of UAE pertaining to the credit information, AECB is mandated to recurrently gather credit information from UAE's financial and non-financial institutions. It keeps details from all UAE banks, financial institutions and individuals and it provides credit reports for a nominal fee providing details of the debt levels and financial creditworthiness of UAE entities.

    Either the individual himself or by executing the power of attorney to the lawyer, an entity can check the credit information from the above-listed sources.

    Though the process and report of due diligence seem to be an exhaustive and in-depth one but the gross limitation of the process is that it is limited to two to five years during the examination. Moreover, legal due diligence doesn't reflect the financial and other due diligence, which is an expert domain of investment or merchant bankers or private equity firm.

    As Dubai envisions itself to be a smart city and with Expo 2020 UAE plans to be the hub of financial and commercial locus of the world, due diligence as a requirement would definitely pick the ground.

     

     

     

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    Tue, 04 Feb 2020 10:08:00 GMT
    <![CDATA[DIFC-LCIA Arbitration vs DIAC Arbitration]]> DIFC-LCIA Arbitration comparison with DIAC Arbitration

    Manchester United is playing Arsenal. In an incredibly intense contest between the two, at the 85thminute, there is a coming together between the players inside the penalty box. The referee, to understand the incident and know who the perpetrator was, uses the help of Video Assistant Referee (VAR). The referee, with the assistance of VAR, was able to identify and resolve the issue at hand. Similarly, Alternative Dispute Resolution (ADR) works in the same manner. When two parties have a dispute, resolving it through the process of litigation can often be an extremely lengthy and time-consuming process, not to mention, rigid as well. ADR, in the form of arbitration, mediation, etc., brings various other options in settling these disputes without going through the process of litigation.

    In this article, we will run through a brief comparison of the procedural and substantive laws in the DIFC-LCIA Arbitration Centre and the Dubai International Arbitration Centre (DIAC).

    The DIFC-LCIA Arbitration Centre:

    The DIFC was established as a financial centre and free zone 2004. In 2008, in agreement with the London Court of International Arbitration (LCIA), an arbitration centre was created with the primary objective being the promotion and administration of effective and efficient arbitration proceedings for parties based in the Gulf and MENA region. The Arbitration Rules 2016, issued by the DIFC-LCIA Arbitration Centre, govern all arbitration proceedings of the Centre, with some of the sectors being construction, media, financial and telecommunications.

    All arbitration proceedings will be conducted by an Arbitration Tribunal which will be formulated by the LCIA Courts, who have the exclusive authority to appoint arbitrators. The nationality of the arbitrator must not be the same as that of either of the parties unless the party with the different nationality agrees in writing otherwise. The appointed arbitrator may be revoked by the LCIA Court if:

    • The arbitrator gives a written notice stating his/her intention to resign.
    • The arbitrator becomes seriously ill and unfit to act and carry out the duties of an arbitrator.
    • The impartiality and independence of the arbitrator are reasonably doubted due to circumstances.

    Once the Arbitration Tribunal has been formed, the parties must contact the Tribunal within 21 days in whichever manner possible. The duties of the Tribunal are as such:

    • To act justly and impartially between all parties.
    • To ensure that the procedures adopted are suitable to the circumstance and provide an efficient and expeditious way to the final resolution.

    After the Tribunal has been formulated, the claimant must deliver a written statement of the case to the Tribunal and the other involved parties within 28 days of the formulation of the Tribunal. Along with the written statement of the case, all legal submissions and details of relevant facts, as well as the relief being claimed, must be submitted. Once the claimant's documents have been received, the respondent must deliver to the Tribunal and all other parties the statement of defence and any counter-claim, if applicable, along with relevant legal submissions and other essential documents. Without exceeding 28 days from the date at which the respondent made the submissions, the claimant must make a statement of reply and any statement of counter-claim, if applicable, that is supported with the relevant documentation. If there is a statement of counter-claim by the claimant, the respondent must, within 28 days, must deliver a written statement of reply. Should the respondent fail to do so, the Tribunal can go ahead with the proceedings and issue the award as necessary.

    The seat of arbitration can either be mutually agreed by the parties before the formulation of the tribunal and in the event that it is being decided after the formulation of the Tribunal, the decision must be taken with the consent of the Tribunal. If any such agreement has defaulted, the seat of arbitration shall be the Dubai International Financial Centre (DIFC). The tribunal can also conduct the hearings at a geographically convenient place other than the designated seat upon consultation and agreement with the parties. With respect to the language of the arbitration, initially, the parties will use the language in which the Arbitration Agreement is formed unless the usage of a different language is specified in the agreement. If mutliple languages are used, the LCIA Court can determine which language can be utilized. If any document is submitted to the Tribunal in a language different from that in which the Arbitration is being conducted, then a translation must be provided.

    The Arbitral Tribunal is empowered to issue interim orders, after a reasonable opportunity has been given to the parties to respond to the claims, such as:

    • Issue order to any party to provide security for the amount in dispute in the form of a deposit/bank guarantee/any other manner.
    • Issue the storage/sale/disposal of any documents, goods, property which is under the control of any of the parties and is related to the subject matter of the arbitration.
    • Issue an order for provisional relief, pending the final award, in the form of payment of money or disposition of property in between the parties.

    With regards to the final award, it can be made in any currency provided the parties have agreed otherwise. The award issued is considered to be final and binding on the relevant parties and must be carried out immediately. The parties won't have any right to appeal or review the award. The choice of law that is to be followed in such agreements is mutually agreed upon by the parties.

    The jurisdiction of the DIFC-LCIA Arbitration Centre has been contended several times. The UAE is a party to the New York Convention on the Recognition and Enforcement of Arbitral Awards. The convention is of the view that an arbitration award issued in any contracting state can be enforced without any unreasonable restriction in any other contracting state except on the following grounds, as per Article 5 of the convention:

    • The invalidity of the arbitration agreement according to the governing law.
    • The defendant was not given proper notice of the proceeding or was unable to present his or her case.
    • The subject matter of the arbitration cannot be settled by arbitration in the jurisdiction where recognition/enforcement of the award is petitioned.
    • The recognition or enforcement of the award is against the public policy of the jurisdiction where the award is seeking to be recognized or enforced.

    The recognition and enforcement of awards have been further set out in Part 4 of the DIFC Law No. 1 of 2013, which states that arbitral awards will be recognized and enforced not just within DIFC, but outside the DIFC as well, in accordance with Article 7 of Law No. 12 of 2004. The jurisdiction of DIFC-LCIA Arbitration Centre was further affirmed in the case (1) Egan (2) Eggert v (1) Eava (2) Efa [2013] DIFC ARB 002, where the claimant wanted to enforce an award, that was issued outside DIFC but within the emirate of Dubai, in DIFC. The defendants contested that since they did not have anything to do with DIFC and did not have any assets in DIFC, the DIFC Courts did not have any jurisdiction over the same. It was held that the defendant is not required to be present in DIFC or have any assets in order to recognize an award, which was in accordance with Article 42 of Part 4 of DIFC Law No. 1 of 2013.

    The Dubai International Arbitration Centre (DIAC):

    The Dubai International Arbitration Centre (DIAC) was established by the Dubai Chamber of Commerce and Industry in 1994 as a Centre of Commercial Conciliation and Arbitration. The DIAC is an independent and autonomous organization that is governed by the UAE Federal Laws. The primary objective of DIAC is to provide arbitration services with the help of internationally qualified arbitrators at an affordable price. The services offered include:

    • Overseeing arbitral proceedings and disputes.
    • Appointing arbitrators
    • Choosing the venue for arbitration
    • Fixing the fee of arbitrators and mediators

    The Dubai International Arbitration Centre is governed by the UAE Civil Procedural Code Federal Law No. 11 of 1992 and the DIAC Arbitration Rules 2007. The arbitration proceedings that are followed are quite similar in nature to that of the LIAC/DIFC Arbitration Centre. The structure of DIAC is as follows:

    • Board of Directors of the Chamber (Dubai Chamber)
    • DIAC Board of Trustees
    • DIAC Executive Committee
    • DIAC Manager
    • DIAC Administrative Body

    The Board of Directors advises the Ruler on the appointments of the Board of Trustees, and their primary function is to oversee the structure and operations of the Arbitration Centre and appoint the senior management. The Board of Directors is not tasked with handling any of the cases that comes the way of the Arbitration Centre. The Board of Trustees, on the other hand, are entrusted with the responsibility of the overall management of the DIAC and is comprised of 15 members having experience in the field of arbitration with the term of the appointment being three years. The Board also has to provide the approval to organizational structure, regulations and bye-laws of the Arbitration Centre, give guidance in the adoption of DIAC's general policies and propose possible changes to the rules and procedures, if any. The Executive Committee is responsible for the implementation of the decisions that are taken by the Board of Trustees and carry out other functions under the DIAC Rules. The Manager, who is appointed by the Board of Directors, is expected to control and administer the rules of DIAC and its bodies. The Administrative Body of DIAC ensures that the arbitration services provided by DIAC run in an efficient manner, that adheres to the DIAC Rules.

    The Arbitration Tribunal, as set up by mutual agreement between the parties or at the discretion of the Centre if the parties are not in agreement, must always be uneven in number. The arbitrators appointed by the Centre must be impartial in nature and must not, in any manner whatsoever, attempt to act as advocates for either of the parties involved. As per the DIAC Rules, the seat of arbitration can be mutually agreed upon between the parties, and if on the contrary, the seat shall be Dubai, unless the Executive Committee determines a more appropriate seat.

    Once the Arbitration Centre receives the request for arbitration, it shall transfer the file to the Tribunal at the earliest of its formation. Within 30 days from the date at which the Tribunal receives the file, the Tribunal must let the parties know the date and venue of a preliminary hearing and accordingly, the Tribunal will fix a schedule for the proceedings. If the Statement of Claim, which has a comprehensive outline of the facts and legal arguments supported with the relief being claimed, was not submitted with the request for arbitration, it must be done so in a span of 30 days of the receipt of notification from the Centre on the establishment of the Tribunal, with a copy being submitted to the Respondent, the Tribunal and the Centre. The Statement of Claim must be accompanied with the required documents the Claimant might be required to rely on. The Respondent shall, within 30 days of receiving the Statement of Claim or the receipt of formation of the Tribunal by the Centre (whichever is later), must submit a Statement of Defence to the Claimant, the Tribunal and to the Centre and this statement must be supported by the required documentation that the Respondent intends to use. If the Respondent intends to pursue any counter-claim, the same must be made in the Statement of Defence. In addition to the Statement of Claim by the Claimant and the Statement of Defence by the Respondent, it is the discretion of the Tribunal to allow any further written statements. In the event that it does, all submissions must be made within a time limit of 30 days.

    The Arbitration Tribunal of DIAC has the power to evaluate the evidence that is submitted, including the admissibility, relevance and expert opinion, if any, on a case-to-case basis and is even empowered to determine the time, manner and format which the exchange of evidence happens between the parties. The Tribunal further has the discretion to hold hearings, allow oral arguments and bring in witnesses. If the witness needs to be heard by the Tribunal, the following must be submitted before the Tribunal at least 15 days prior:

    • Identity and address of the witness
    • The subject matter of their testimony
    • Relevance to the issue at hand
    • Language of testimony

    The Tribunal is also empowered to issue any provisional/conservatory orders it deems necessary. If any party requests a competent judicial authority for an interim or conservatory measure or for the implementation of any directive issued by the Tribunal, it will be deemed to be compatible with the Arbitration Agreement entered between the parties. In the event that the Claimant does not produce a Statement of Claim, the Tribunal can refuse to proceed with the claim, but this will not stop it from pursuing the Counter-Claim of the Respondent. If any party fails to utilize the opportunity to present its case to the Tribunal and does not show any reasonable cause for the same, the Tribunal can draw any inference it deems appropriate from such conduct.

    With respect to the rules of law, the Tribunal can decide to implement the rules of law as mutually chosen by the parties, and if that is not the case, then the Tribunal is to apply the law which it deems to be most appropriate. Once the Tribunal decides that it is satisfied with the opportunities given to the parties to present their submissions and pieces of evidence, it can declare the proceedings to be closed. In exceptional circumstances, the Tribunal can re-open the proceedings, either on its own motion or at the application of either of the parties, at any moment before the award is made. Within six months from the date at which the Tribunal received the file, the Tribunal must issue the award and can extend the time-limit for an additional six months. If the Tribunal feels that it needs further time, then it can request the Executive Committee to do so. The awards made by the Tribunal are binding on the parties, and since the parties wave their right to appeal in agreeing to proceed with the arbitration proceedings, it is final. If the parties need any further clarification on the award, within 30 days from the date of receipt of the final award, the parties can request the Tribunal for an interpretation of the said award.

    The UAE is a signatory to GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications as well as the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. This means that an arbitration award that is made in any of the contracting states can be recognized and enforced in any of the other contracting states. If the enforcement of the award by a contracting state is against the public policy that it follows, then the award cannot be enforced.

    Conclusion:

    The resolution of disputes using the method of arbitration has been exceptional in giving the involved parties a sense of flexibility and pace with the proceedings. With the bilateral treaties between countries and conventions like the New York Convention and the GCC Convention, arbitration proceedings and awards can be easily recognized and enforced in various countries throughout the world.

     

     

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    Thu, 02 Jan 2020 17:54:00 GMT
    <![CDATA[Hedging Strategies for Power Contracts]]> Hedging Strategies for Power Contracts

    Introduction

    The worldwide establishment of the power markets is primarily due to the global restructuring and reorganisation of the electricity and other energy supply market. Since the electric power industry is structured in three distinct segments of power generation ranging from production to transmission and distribution, this calls for different levels posing different attributed risks.

    The diverse features of the power markets create an environment of the most volatility of prices for power, fuel and emissions allowances. It deals with high price volatility. Noting this, the power plant giants engage in customized long-term business transactions to hedge the risks. Majority of the power projects are structured on power purchase agreements. In here, the long-term contracts take place where the investor seeks and anticipates for a high(er) degree of certainty.

    The international commodity market carries with itself various difficulties and gradations, but certainly, the power and the electricity market stand apart from the rest. Power prices have an extreme level of volatility and fluctuations and are vulnerable to price spikes. This, in turn, relates "to the lack of economic storage for electricity and the concomitant requirement that production match consumption in real-time".

    Hedging in the literal sense

    Hedging deals with executing several transactions where the expectation is to substantially offset the risk that is exposed in the project. Hedging involves commercial transactions to reduce risks by transferring the risk to those with opposite risk profiles or with investors who are willing to accept the risk in exchange for an opportunity of profit.

    Global Strategies for Hedging Power Contracts

    I.Delta Hedging

    Delta hedging is a strategy involving the execution of transactions having equal but opposite delta exposures. This makes "the combinations of the initial portfolio and the hedge transactions" as delta-neutral. Delta neutral means delta of zero. This is generally encountered by forwarding trading or future based contracts. Hedging with futures eliminates the risk of fluctuating prices, but also means limiting the opportunity for future profits should prices move favourably. This occurs because the delta of an option depends on the underlying price.

    II.Market-Based Valuation

    The model involving the market-based approach is essential for pricing and risk managing these bilateral (sometimes multilateral) power transactions. The valuation involved is conducted by adding the price of the electricity being the variable together with a discounting factor, which significantly increases the intricacies of pricing electricity contracts.

    III.Dynamic Hedging

    Dynamic hedging for reducing risks creates least exposures for price volatility and makes more money on the other hand. The market is approached with long flexibility, and there is more active participation in the short-term markets.

    In its general nature, the risks that are dynamically hedged are a future commercial setting based on production in the future. The risks are hedged through the trade via commodity prices, creating a stabilized environment for the expected cash flow.

    IV.Hedging Tolling Contracts

    Tolling stands out as an innovative structured transaction employed in the power industry. Electricity tolling agreements, as well as other structured transactions, have played important roles in facilitating risk-sharing and risk-mitigation among independent power producers, utility companies and unregulated power marketers in the restructured power industry. Because of the continuous evolution of the power markets, there will be more transparency of pricing for these complex structured transactions.

    V.Pure Merchant Setting

    In a pure merchant setting an investor can collect the revenue where power is traded based on a spot market. But on the other hand, the collections are highly unanticipated since they are not independent of the availability of prices when the sale of the project is put up.

    VI.Revenue Put Option

    The Revenue Put Option creates a definite revenue flow from trading power while hedging subsists. It makes sure that the Power project does not suffer, and considerable revenue is generated during the hedging takes place, to secure project financing

    This option opens a path for the project owner by entering into an option contract with the seller which are generally the sophisticated financial institutions which are not interested in buying electricity but to act as a financier to arrange a deal. The hedging counterparty can sometimes be an unrelated third party. This starts with the seller generally called as the hedging counterparty to "pay the difference between the hedge-specified floor revenue and the power plant's actual revenue from power sales" in case the revenue generated from the sales is less than the hedge price.

    Internationally, the current scenario calls for 12-13 year option available in the market, which is expected to expand and enhance the investments in new and upcoming electricity plant projects.

    VII.Synthetic Power Purchase Agreements

    This strategy specifically aids as insurance in cases of decline in power prices, which creates access to certainty for the lenders and more clarity about the project.  In this model, the owner trades the electricity in merchant basis by entering into an agreement with the seller who can provide a steady stream of revenue. This strategy sets a revenue price range benchmark where if the sale happens in the range, no risk is attributed. The owner must pay the difference under the synthetic PPAs according to the price fluctuations. Synthetic power purchase agreements give an edge to the provider of the agreement.

    VIII.Rolling Hedges

    The rolling hedge model reduces the risk by the creation of "new exchange-traded options and futures contracts to replace expired positions". A contract with a new maturity date close to the exposure dates on similar terms is awarded to the investor in a rolling hedge strategy. This model is an effective way to quantify the risk by multiple revelations over time. A roll-over strategy can be implemented "when the holding period exceeds the delivery dates of active future contracts".

    IX.Long and Short Hedges in Future Contracts

    Short hedge, generally known as the seller's hedge in used in protecting the inventory value. Since the commodity value in storage or transit in known, a short hedge can be used to essentially lock in the inventory value. A long hedge is the purchase of a future contract by someone who has the commitment to buy in the cash market. It is used to protect against a price increase in the future.

    X.Volumetric (neutral) Hedge

    The model involving Volumetric Hedging minimizes the residual between Base/peak contracts and the hourly forecasted demand/generation.

    XI.Financial (value-neutral) Hedge

    The financial Hedging model minimizes the difference between the value (costs) of the Base/Peak contracts and the value of the hourly forecasted load curve with the usage of an hourly price forward curve (HPFC) which is a very abstract forecast of the spot price in the future. Here the sum of Base and Peak contracts shall not mandatory result to 100% of the forecasted demand but close to this. Important here is as I told above the hedge value to be zero or close to zero.

    Summary

    In a highly volatile market like that of electricity and power, the market players must have a broad range of understanding of the risk management strategies. An appropriate amount of management instruments is required for the certainty of the global performance of the electricity and power markets. It is, therefore, a challenge to the energy regulators to enhance the liquidity of risk management instruments such as intra-day options. The primary motive behind hedging for a corporation should be maximising the standing and value of the firm on a global standing. The value of the product and the prices are enhanced by a reduction in the financial distress and variance of taxable incomes.

     

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    Sun, 17 Nov 2019 10:19:00 GMT
    <![CDATA[outstanding bank loans payment]]> Do you have outstanding bank loans and credit card payments?

    "Some debts are fun when you are acquiring them, but none are fun when you set about retiring them."

    Often, unexpected events can astound an individual in an array of ways like a change in employment, personal emergency, etc., which may rapidly throw the individual off track. Consequently, in the long run, one may "default" in payment of credit card bills or loans. Bank settlements in today's times can be monotonous as well as painstaking. The jocundity of swiping your credit card whilst forestalling the incapacity to repay the same or default in repayment of loan could lead to drastic and harsh scenarios such as the bank imposing travel bans or resorting to severe legal action including cheque bounce and civil cases filed for recovery. How does one sleep peacefully at night with the scare of such legal action hovering in his mind whilst staying perturbed about negotiating with banking sharks as well as obdurate debt recovery agents?

    Matters that involve corporate defaulters or wilful absconders will face legal consequences that include prosecution, court claims and other legal remedies banks and/or their lawyers in Dubai or overseas may choose to initiate. Further, Interpol red alert is also a consequence of such default. Additionally, there are also cases where individuals are unable to return to Dubai on account of domestic/family emergencies, untimely loss of employment being communicated while they are in their home country, or where an employee is undergoing medical treatment for a long time. The so-called "unintentional defaulters" desire to settle their claims with banks and wish to return to the United Arab Emirates (UAE) to secure their future and work in the country.

    Naturally, every lender is suspicious and it is valid for loan specialists independent of whether it is an individual, an association, a foundation or a sovereign government. The Oxford Dictionary meaning of "default" signifies the inability to pay, act, not meet cash calls, and so forth.

    Limited understanding of the UAE laws and regulations, lack of language or procedural knowledge, inexperience in negotiating skills, unreasonable and untimely pressures from collection agents, coupled with lack of security deter or prevent the unintentional defaulters from settling their matters in a timely manner. It is vital to be conversant with the local laws, understanding your legal rights, obtaining the proper set of settlement documents, knowledge of penalty and interest charges that can be imposed, the return of security documents, grasping the precise process besides ensuring fair negotiations as they are all very important in such process. A default is also overlooked by a bank as serious and grave offence which often compromises communication between the parties leading to a dead-lock, thereby preventing the defaulter from re-entering the UAE. 

     

    Dishonour of cheques and travel ban?

    In most situations of default in loan and credit card payments, one simply hands over blank signed cheques as a guarantee to the banks and/or their agents for quick imbursement of loans or acquiring a credit card, which now is the trump card held against the debtor in a bank settlement by the bank. These cheques are used by the creditors as a weapon against the debtors by bounding the cheque and proceeding towards immediate criminal complaints followed by a travel ban.

    In addition to criminal action, the banks may additionally evaluate and opt for other remedies such as civil claim or consider other steps that their counsels may deem expedient in the best interest of their client, the bank.

    That said, it is imperative to understand that in line with a criminal order being Decision Number (1) of 2017 (Emirate of Dubai), Decision Number (119) of 2019 by the UAE Chief of Public Prosecution (for United Arab Emirates) as well as Decision Number (2) of 2018 (Emirate of Ras al Khaimah), cheques amounting up to AED 200,000 (UAE Dirhams two hundred thousand) can be subject to a jail term towards any cheque bounce or for small claims which is upon the discretion of the Prosecutor to forward the matter to the courts of UAE or not. Banks can, however, present these claims before the authorities, wherein the defaulters will be subject to a fine (without undergoing any court order or prosecution).

    The events which may constitute a default in loan agreement includes, but is not limited to:

    • Evasion of judicial judgement;
    • Bankruptcy or insolvency proceedings against the borrower;
    • Significantly opposing change;
    • Breach of warranties, covenants and representations;
    • Force majeure.

    General Clauses in Loan Agreement

    Certain clauses that are generally integrated within a loan agreement include:

  • Waiver: This is where the lender agrees to waive the breach or the event which gives rise to the occurrence of a default;
  • Forbearance: This is where the banks concur not to announce an occasion of default to practice any cures;
  • Negotiate through an expert…

    It is in difficult situations like these wherein banking experts specializing in bank negotiation and loan settlements come in the picture. Yes in a land of expats there are multiple changes in one's living standards and financial situations which at times leads to default in loan, but does not make someone a wilful defaulter.

    Specialized lawyers in bank settlements will examine the situation along with the facts post which shall represent you before the disturbing debt recovery agents and the respective loan recovery bank associates. Having a specialized lawyer shall give the debtor a consolidated chance to have a flexible payment plan or a concession on your interest amount at times along with the principle and shall provide you the cushion to plan your finances.

    A bank settlement expert helps to mentally secure the debtors for the outstanding amount, who are now post their involvement looking forward to a logical loan settlement rather than chasing a defaulter.  The services provided by the banking lawyers shall include drafting and responding to legal notices, corresponding via telephone, email and letters with the creditors and banks, as well as attending settlement meeting on behalf of the creditor.  

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    Sat, 02 Nov 2019 11:13:00 GMT
    <![CDATA[GM Food Technology in UAE]]> GM Food Technology in UAE & Global Purview

     

    "The Food You Eat Can Be Either The Safest & Most Powerful Form of Medicine or the Slowest Form of Poison"     -Ann Wigmore

    Since times immemorial humans have cultivated crops for food, they have been picky about beneficial traits for bumper breeding.  This motive of humans in the 21st century is served by modern biotechnology and associated invitro fertilization process. Food that is grown through genetic alteration via use of biotechnology and laboratory techniques at the cellular level are called genetically modified organisms (GMOs). Food and feed containing GMOs or produced from GMOs are known as genetically modified (GM) food and feed.

    With population burgeoning, climate change showing adverse impacts and intrusion of transnational companies in the domain of agriculture, there has been a hue and cry among marginal cultivators, environmentalists and health activists regarding the ill effects of GM food technology. Whether its United States (US), the United Kingdom (UK), India, Africa or Middle East Countries, there has been a considerable resistance and opposition to the introduction of GM foods in supermarkets and open culturable lands due to the risk it poses to environment and health of not only humans but also of flora and fauna and landscapes like soil and water.

    Digressing a bit from the scope of this article, it's quite significant to understand why there has been resistance all around the globe with regard to GM food. Firstly, create food totalitarianism that is only TNCs who have GM technology can manufacture seeds and food products thereby creating a monopoly through their patents and being price-makers in the economy. Secondly, GM crops require much more pesticides and water for cultivation which increase ecological footprint. Thirdly, the fear of unknown allergens and being carcinogenic. Fourthly, widespread cultivation of GM crops would reduce genetic variation among plants and create monoculture thereby reducing diversity in nature.

    It is important to have a bird's eye view of the GM food regulations around the globe to have a better picture of how GM food are dealt by jurisdictions all around the globe and international authorities vis-à-vis United Arab Emirates (UAE) regime regarding GM food.

  • USA: US Food and Drug Administration (FDA) evaluates if genetically modified crops are safe to consume, and stated that food labels are not obliged to mention GM content unless there are changes to the properties of the food e.g. a potential allergen.
  • European Union: European Union via Regulation (EC) No 1829/2003 of the European Parliament adopted labelling rules which require products to be labelled if an ingredient contains 0.9 per cent or more genetically engineered material so that the consumer can make an informed choice.
  • Australia and New Zealand: Both the Oceanic countries adopted mandatory labelling rules in 2001 if there is more than 1 per cent presence of any GM content.
  • India: Food Safety and Standards Authority of India (FSSAI) Regulations 2018 has issued guidelines for mandatory GM labelling if there is more than 1 per cent GM content in food. The Central Government though has set the threshold at 5 per cent of genetically modified content in the food product.
  • South Korea: The country has a higher threshold for GM food labelling i.e. above 3 per cent. It also has three categories viz.
    • genetically modified
    • partially modified
    • possibly contain genetically modified
  • Saudi Arabia: It requires labelling of information pertaining to genetic modification in different ink written in both English and Arabic and a triangle should be drawn.
  • The case of UAE is no different as there has been growing anxiety and cautiousness among the consumers and environment activists regarding the contents of food products. In 2011, the scientists at Abu Dhabi Food Control Authority conducted a study which revealed that GMO foods that were sold in the Emirates, has 16 out of 128 food samples tested containing GMO material, mostly soya or corn. Similarly, Greenpeace conducted a study of 35 items which were purchased in the UAE and Kuwait, and the results were astonishing as the majority of items were contaminated with genetically modified organisms (GMO). In UAE, 40 per cent of food is genetically modified yet without proper labelling laws here, consumers are unaware.

    An overview of the food safety regime in UAE gives more in-depth understanding about the responsibility the food manufacturers would have to take for food safety:

  • Federal Law On Food Safety: The law lays down the standards and regulations for maintaining the safety and quality of food to ensure the protection of public health and consumers. The law imposes strict penalties for companies endangering food safety across the UAE. In fact, no food could be imported for the first time without approval of Ministry of Climate Change and Environment. The Ministry through its National Food Safety Committee works to implement law on safety to ensure high standards of safety throughout food chain.
  • National Food Accreditation and Registration System: As per the Ministerial Decree Number 239 of 2018, food whether imported or locally produced or modified, its composition must be registered before being marketed locally. The ingredients before being marketed need to be registered in the electronic system viz. ZAD.
  • The National Rapid Alert System for Food: This was launched in 2017 to ensure effective implementation of response measures in case serious food risks are detected. The system has devised categories as either high, medium or low in case of risk.
  • Local Entities Ensuring Food Safety: Abu Dhabi Agriculture and Food Safety Authority is the authority which authenticates food safety in the emirate of Abu Dhabi and certifies that the food is fit for human consumption. It conducts the vital research and studies on safe food practices and issues rules, regulations and standards on the food items that could be sold and fit for human consumption.
  • Control of Imported Food: UAE is a signatory to the World Trade Organization Agreement on the Sanitary and Phytosanitary Measures (SPS). The agreement sets provisions on how governments can apply food safety and animal and plant health measures.
  • Besides above, UAE has National Strategy for Wellbeing 2031 which is in tandem with Vision 2021 and UAE Centennial 2071 and thus, line with it, the government is planning to introduce Federal Law to govern GMOs and its related products including food. Besides, UAE adopts positive labelling system to label GM products. To screen GM foods Dubai Central Laboratory has developed polymerase chain reaction (PCR) to test actual contents of food to conform to product description.

    The law in UAE pertaining to GMO food and related products are mainly two regulations covering GMOs, the UAE.S GSO 2141:2011 "General Requirements for Genetically Modified Unprocessed Agricultural Products." This technical regulation outlines general requirements for unprocessed agricultural products obtained through certain techniques of genetic modification and unprocessed agricultural products that contain genetically modified organism, if the GMO present is higher than one per cent. Secondly, the UAE.S GSO 2142:2011 "General Requirements for Genetically Modified Processed Agricultural Products." This technical regulation covers general requirements for processed food and feeds obtained through certain techniques of genetic modification and processed food and feed that contain or produced from genetically modified organism if the GMO present is higher than one per cent of the ingredients. In addition, GSO 2371:2014 specifies the typical terms and definitions of genetically modified food.

    The safety of GM products is also ensured via 8 safety guidelines formulated by the UAE government. The Dubai Government has delegated the authority to let importation of foodstuff as well as monitoring the labelling and testing of the products to Dubai Municipality (DM). Dubai Municipality liaises with the Emirates Authority for Standardization and Metrology (ESMA) in the context of adopted relevant standardization in the UAE. The labelling of the GM products must be done on the wrapper of the food product. The language which mentions the ingredients and other details should be in English and Arabic for ease of understanding of the consumer. If "GMO Free" status is claimed on a product label, the supplier must provide a GMO-free certificate from a competent authority which is empowered in the country of origin in case of imports.

    Conclusion

    Therefore, the implementation of new Federal Law on Biosafety of GM food has objectives to protect public health from the risks arising from genetically modified organisms or their products. It also covers protection of the environment in the development, manufacture, production, transfer or circulation of genetically modified organisms or their products.

    This new federal law is, therefore, a thoughtful step on part of the government as with increasing consumer consciousness and environmental deterioration due to exploitation of natural processes through use of modern biotechnology,  the new Federal Law is progressive in the sense that it would protect the human health and the environment as well as provide the food manufacturers clear guidelines with set of dos' and don'ts as to how they should label their product and mark it with GM label so they don't fall into controversial issues.

     

     

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    Mon, 21 Oct 2019 10:17:00 GMT
    <![CDATA[Music meets Dance]]> Bollywood Deals: Music Meets Dance

    Who isn't a fan of Dilwale Dulhaniya Le Jayenge? The lens takes us to the romance set in the mountains of Switzerland to a typical wedding household in India with dance, music, drama, and emotion. Bollywood is one of the most prolific centers of film production in the world. It dramatically affects Indian society and culture from the past few decades and has influenced day to day life and culture in India from fashion trends to choreography of dance numbers, where it has been the most significant media outlet. In regards to ticket deals, Bollywood offers approximately 3.6 billion tickets yearly over the globe, contrasted with Hollywood's 2.6 billion tickets sold.

    Thousands of movies are signed each year, and it is essential to understand the contractual obligations to follow in the industry. The industry consistently goes into agreements under numerous types of unfulfilled promises from oral communications, casual correspondence, and draft contracts communicated through production and frequently stay unsigned. These unsigned arrangements refer to as "soft contracts"  are sustained by a theoretical risk of legal requirement combined with some prospect of reputational risk. The Indian film industry has been social relationship driven, under which the game plans and claims were either oral or insufficiently reported, and the debates settle without going into litigation or court.

     In the last couple of years, the Indian film industry has woken up to the requirement for composed contracts and security of Intellectual Property (the IP) rights. The need emerged because the Indian film industry saw a change in outlook in its structure in the recent period. After it was agreed the "industry status" in 2000 by the Government of India, the next years saw the movies accepting subsidizing from the banks, and Indian corporates, for example, Sahara, Reliance gathering, Mahindra and foreign studios, Warner Bros., Twentieth Century Fox and so forth. The banks, Indian enterprises, and remote financial specialists demanded composed contracts with the producers and required the producers to have legal agreements with the cast also, including a proper chain of title documentation. With the expansion in commercialization openings, the abilities that delayed to sign even a one-page contract until mid-2000 began introducing nitty gritty composed arrangements to safeguard their commercialization rights, e.g., marketing rights. On the one hand, however, the development of this industry has been spectacular, then again, the breath-taking universe of Bollywood has seen a surge of cases for breach of the agreement.

    In the past, legal contracts in Bollywood were pretty straightforward. The producers drafted a standard one-page contract stating the music rights for the record studios and one with the wholesaler for appropriation to the silver screen. More critical than the paper was the customary handshake, as no one was comfortable by prosecuting anybody or taking each other to court. The contented course of action crumbled with the happening of home review innovation, when there was a whirlwind of the prosecution to decide if the rights to the video were vested with the maker or the merchant. Today, things are getting more intricate with incomes from music deals, including screenings on planes and luxury ships.  Bollywood is marking a more significant number of agreements recently. Exploiting the rights of a film incorporates transforming it into a computer game, promoting garments associated with cinema, remix and copying the music, etc. The extent of the agreement can be as restricted as expected under the circumstances, while for those purchasing the rights, it is tied in with arranging terms that are as expansive based as would be prudent. For example, famous Indian actor Akshay Kumar has a clause that he won't be working on Sundays. Famous Indian actors have clauses in their legal contracts according to their ease. The famous Bollywood song "Khaike Paan Banaraswala" from the movie Don in 1978 claimed against the maker of the similar title, Don in 2006. The new Don had acquired the rights from Nariman Films, the makers of the first film, under a composed contract and joined the tunes in a different version.

    The Bombay High Court held that the agreement between the makers of the first movie and the offended party (and Kalyanji) was an agreement of administration and along these lines, the rights were with the maker and not the authors. The maker had the legitimate and appropriate power to cut out any part or entire of the reasons in the melodies to the litigants, and in this manner, the agreement between them was substantial. As partners in the filmmaking and appropriation process go into a few composed contracts to record their legitimate and business understanding, the scholarly debate emerges out of non-execution of legally binding commitments or non-payment of sums. Under the Indian Contract Act, 1872 (the ICA), one cannot mainly implement all agreements, and courts don't allow break orders for particular execution. In Indian, the courts cannot principally uphold the individual contracts administrations.

    India churns out over 1,100 films a year, more than any other country across the globe. Anupam Kher, famous Indian actor, and writer were one of the few skilled actors when he entered the film industry thirty-two (32) years ago, and that most of his 450 films did not even have scripts and with producers would have a casual talk and informally discuss the movie. They would only get paid after it was in the cinemas as there was the trust circle around the industry. However, times are changing, and actors are well informed about signing formal contracts. As investors in the filmmaking and dissemination process enter a few legally obliged contracts to record their right and business understanding, the lawfully binding question emerge out of non-execution of authoritative commitments or non-payment of the agreed amount.

    On the other hand, considering the non-performance, it is hard to look for a quick court order for a particular execution of the agreement, as under Indian law, we cannot mainly implement all arrangements. Courts don't allow interval orders for specific performance, and one cannot perform the contracts for individual administrations. Henceforward, if the desired person does not give concurred dates or if he does not convey the music on time, then the only remedy available would be in the form of damages. In case the parties to such agreements have agreed that arbitration shall settle the disputes arising out of the contracts, the parties can still approach the court for specific interim measures. Section (9) of the Indian Arbitration Act, 1996 sets out specific situations where individuals may contact the court for specific of provisional measures. The court was of the opinion that this authority of the Court might be practised even before an arbitrator has been arranged, overruling the prior position that the court can exercise power if demand for mediation has been available. The judge may concede such as interim measures of protection as may appear to the judge to be fair and just. The parties seeking the judge should need to establish prima facie and a comfort zone. For instance, if a satellite merchant has secured satellite circulation rights and does not pay the maker in a timely fashion, then the filmmaker may approach the court to seek an interim injunction.

    Indian Contract Act, 1872

    Without the ICA, it would have been hard to exchange or carry out any business movement in the corporate world. According to the ICA, an 'agreement' is a statement enforceable by law.  A 'declaration' signifies 'a guarantee or an arrangement of guarantees' framing consideration for each other. A statement comprises of an 'offer' and its 'acknowledgement.' The target of the Contract Act is to guarantee that the rights and commitments emerging out of an agreement are acknowledged and that the remedies are made accessible to the breach of rights individuals.

    Hollywood Deals

    Similarly, Hollywood regularly enters into promises under any backed up legal document. Oral correspondence, virtual communication, draft agreements, etc. negotiated between makers and production often remain unsigned and carry a threat of reputational liability. Decreasing formalization in agreements lessens its enforceability, which enhances adaptability and making it flexible with the terms to change contract terms at the party's expense of execution. Increasing formalization builds enforceability, which reduces flexibility by distinguishing an arrangement of conditions in which a nonterminating party can debilitate a legal course of action in light of a threatened withdrawal. Unformalized contracts or as known as 'soft contracts' are the preferred option among the industry as it achieves the same probable outcome with lower cost. Making a film requires a lot of funding, and the capital prerequisites have a tendency to be high, the chances of the movie being a success are thin, and the contracting dangers are remarkable. These variables give the premise to distinguishing the monetary justification behind Hollywood's particular contracting practices. 'The Motion Picture Association of the United States of America reported that in 2007, major studio films had an average production and distribution costs of US Dollars106.6 million.'  It takes a long time to create a movie, from the script writing to its release at the box office. At different points, parties must make what institutional financial experts call particular investments in the undertaking project that is, investments that have a lower value or no value in any alternative use-before having any authentic information as to the similarly commercial outcome. The high risk of business failure joined with the chance of uncertainty with the constant speculation and the disaggregated structure of the film business, represents what the Hollywood press calls the 'waiting game.'

    Exposure to conventional thinking and business-law practices show that parties favor formal enforceable contracts over oral communications or other casual interchanges that are uncertainly enforceable. Hollywood seems, by all accounts, to be a particular case: parties in high-stakes exchanges routinely select moderate levels of legally binding contracts that leave the enforceability of the parties' responsibilities misty. Lawfully enforceable agreements give the most proficient administration component at whatever point any elective instrument, from formal contract to transactional exchange, can't autonomously accomplish an unrivalled expected result net of detail and requirement costs.

    Validity of Soft Agreements

    In India, it is only under certain circumstances where an unsigned agreement is considered to be valid. An example of the same is the case of Union of India v. Rallia Ram [AIR 1963 SC 1685] wherein the agreement in question was an arbitration agreement which was not signed. It was assumed that a valid contract existed between the two parties, but the arbitration agreement which has been reduced to writing was not signed by either party, the same being the subject matter of the consideration. The Supreme Court, in these circumstanced held that this unsigned agreement would be considered valid. In the United States, can an unsigned agreement still be considered a contract? Yes, it can be, for the purpose of statute of limitation as held in the case of Blanchard & associates v Lupin Pharmaceuticals, Inc and Lupin, Ltd., 7th Circuit Court of Appeal, No. 17-1903 dated 20 August 2018. In this case, Judge Sykes while quoting Illinois Supreme Court confirmed that a contract would be counted as a "written" contract even if the same is unsigned. The same was to be considered for the purpose of statute of limitation. Blanchard wished to bring a claim for breach of contract, and the question was whether it survived the limitation period. It was held that the ten-year limitation period applied to the engagement letter between the parties even though it had not been signed.

    Indubitably, whether or not a soft contract is valid depends on the surrounding circumstances and additional evidence.

    What is Bollywood wanted to shoot a film in the United Arab Emirates?

    The shooting permit in Dubai is solely provided by the Dubai Film and TV Commission (DFTC), established by Dubai Government Executive Council Decision No 16 of 2012. The DTDC is the single point of contact to obtain the permit for shooting anywhere in Dubai. It liaises with different authorties such as Dubai Police, Dubai Municipality, general Directorate of Residency and Foreigner Affairs, the Roads and Transport Authority, as well as owners of different locations in the UAE to obtain the relevant approvals before the permit to shooting films is issued. Similarly, there various types of permits that be obtained for shooting in Abu Dhabi, like the aerial permit, private location permit, offshore permit, etc. Additionally, there are regulations governing the import of film equipments in Abu dhabi where temporary import license is granted upon completing the application process.

    Conclusion

    Bollywood films have progressively broken records on the box office accumulating millions of dollars, which have additionally influenced both multinational organizations and Indian companies to invest in Bollywood films.  The Indian film industry has been social relationship-driven, under which the movies and arrangements were either oral or inadequately recorded, and the debate settles without going into mediation or litigation. It implies the absence of an appropriate chain of title documentation is promoting individual rights for the agreed parties. However, recently, the Indian film industry has woken up to the need for formal contracts to mention their powers and duties expressly.

     

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    Thu, 19 Sep 2019 17:52:00 GMT
    <![CDATA[Cross Border Mergers]]> Cross Border Mergers

    Introduction

    Recently there has been a noticeable wave of mergers (especially in the banking sector) within the GCC. Just in 2017, there were 85 mergers in the UAE and over 400 mergers in the GCC. Many of those mergers were cross border mergers; for instance, in the UAE, over 50% of the mergers were of cross border nature. Many factors are attributable to this vibrant market, such as the locality, the resources and the seemingly endless liquidity. However, it is evident that the approach taken by the legislators and regulatory divisions form a fertile ground for these investments to flourish. It well established that commercial law in the UAE is specifically tailored to attract promising and prominent foreign investments, obviously while securing local concerns. Hence, you find various options with minor restrictions with regards to foreign direct investments and cross border mergers. Although the law regarding cross border merger is considered vague by some critics, many find in this an opportunity to create larger robust firms that contribute more to the economy. As a result, the UAE and other GCC nations continue to ease restrictions and create more opportunities for foreign investments.

    Licensing

    The United Arab Emirates is composed of seven emirates joined together by a federal constitution which gives each emirate specific legislative authority, while retaining some at the federal level. All businesses in the UAE need to obtain licensing from their respective emirate to operate within their borders. Different licensing options are available according to several factors, such as the trading zone, the origin of the business activity and the formation of the business.

    There are two types of zones available for businesses to operate within the UAE; those are mainland and free zones. There are various exemptions on Free Zones from the requirements on the mainland. For instance, a business does not need to be owned by a local majority or even have local shareholders. In addition to that, companies may benefit from zero-tax rates and relaxed custom duties.  On the other hand, businesses on the free zones find it challenging to build a presence in the local market due to limited access and customs duties. Either way, companies need to consider the location of their business to determine the applicable law. Mergers are no different, for a merger to be successful on the mainland, companies need to fulfil the requirements of the Federal Law No.2 of 2015 on Commercial Companies; while mergers within the free zone need to consider and apply the provisions of Federal Law No. 8 of 2004 on the Financial Free Zones in the UAE.

    Tax

    Corporate tax

    The legislation does not impose a corporate tax; however, states impose a corporate tax on foreign banks and oil companies by local decrees. The taxes imposed on foreign oil companies extracting oil in the UAE can be as high as 80%.

    VAT

    Recently, the UAE introduced the VAT tax at a standard rate of 5%. Businesses are required to register for the VAT if their turnovers are over $100,000.

    Merger process

    There are two possible ways to merge in the UAE; those are absorption and combination. Companies that intend to form any merger in the UAE need to follow the prescribed procedure and fulfil the respective requirements.

    As previously mentioned, the law regarding mergers is particularly vague; in fact, there isn't a specific article or part of legislation dedicated to cross border mergers. Instead, companies need to satisfy the general legal requirements of the concerned merger region(s). Some companies (such as Oil and Gas companies) are subject to certain exceptions. 

    In Practice, the acquiring and the target company need to verify each other; then the merger agreement needs to be drafted and accepted; it is the most significant part of the process. The relaxation of the merger laws in the UAE and the GCC makes the agreement a detrimental factor for the parties to secure their rights. The agreement shall specifically define the conditions and the method of the mergers and the process of the transfer of shares. Additionally, the merger agreement should determine the memorandum of association of the newly formed company and the particulars of the board members. The merger agreement like any contracts is subject to the Federal Law No. 5 of 1985 on Civil Transaction Laws.  

    Addition requirements for a successful merger include the approval of at least three-quarters of the shareholders within each company. Members who object to the merger may withdraw from the company and retrieve the full value of their shares. Those members will need to provide a written request within 15 days of the merger's decision, and the merger may not be finalised until those members are fully paid.

    Merging companies will also need to notify their creditors as soon as ten days after the approval of the general assembly. Objections to the merger may dispute the issue in a competent court. Finally, a company will need to issue a declaration of incorporation in the registrar of companies. However, the merger shall be suspended for three months following the date of the declaration. In no valid objections were made during that period, then the companies are considered legally merged, and the newly formed company bears the liabilities of the former two.

    For two (or more) limited liabilities companies to merge both the companies are dissolved, and their corporate personality is abolished. Subsequently, a new company shall be formed where it will bear all the liabilities and debt of the previous two companies. Shareholders in the target company may have their shares transferred as to the agreed upon transfer rate or bought by the acquiring company.

    Once the companies are legally merged, then they may not raise any claims or objections against each other, since they have the same single corporate personality. Only the company may vindicate any wrong done against it, while it is responsible for the rights and obligation it agreed to uphold.

    Merger clearance

    In some cases, parties may need to apply to the Ministry of Economy for a Merger clearance pursuant to the competition law. Unless an exemption applies, a merger clearance form shall be submitted where there is an economic concentration.  The Competition Law provide the definition of economic concentration as "any act resulting in a total or partial transfer (merger or acquisition) of property, usufruct rights, rights, stocks, shares or obligations from one establishment to another, empowering the establishment of a group of establishments to directly or indirectly control another establishment or another group of establishments".

    Restriction on foreign ownership

    The restriction on foreign ownership is considered the toughest restriction on foreign investors within the GCC. Traditionally all businesses in the UAE needed to be owned majorly by local entities; therefore, foreign investments may not constitute over 49% of the total shares in a company. As many investors found this impractical, a culture of side agreements was developed where the Local shareholder would limit their rights in profitability and management to an agreed extent. This practice was then outlawed, and those agreements were considered unenforceable. However, that law was deferred, but the enforceability of the agreement remains a grey area.

    Recently, the UAE has announced certain changes that will be applied to the foreign ownership limitations which may allow companies (that are not part of the restricted sectors) to be 100% foreign owned even on the mainland. However, a list of (negative) industries has been drafted that won't be included in the waiver. Either way, such a change will definitely give rise to a new wave of cross border mergers that will hopefully drive the economy to set new records. 

    Noncompliance

    Following Articles 313, 314 and 316 of the Commercial Companies Law, any foreign company based outside the UAE may not operate within its borders unless it has acquired a permit from the Ministry of Economy and Commerce and the concerned authorities in the respective state. Noncompliance with these requirements will render the company's persona inexistent, and therefore the member will be personally liable for any breaches.

    If the merger clearance is required and not obtained, the enterprise will be subject to a fine representing between 2 to 5 per cent of their total annual revenues, or a fine ranging between AED 5,000 and AED 5 million.

    Conclusion

    The UAE is currently the most targeted country in the whole of the MENA region for foreign investments and cross border mergers. The wave of mergers and cross border mergers seems to be continuous all the way through the first quarter of this century. The hosting of EXPO 2020 and the continuous modernisation of the region play a vital role. More significantly, the introduction of appealing legal reforms and the ease of restrictions is the key factor for the smooth flow of direct foreign investments. However, businesses and corporation need to exercise due diligence to fulfil and apply all the legal requirements to avoid hefty fines and penalties. The requirements imposed are merely used as a tool to effectively control the market while allowing as much freedom as possible for investors.

     

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    Sun, 04 Aug 2019 12:09:00 GMT
    <![CDATA[Development in Auh Healthcare]]> Recent Development in Abu Dhabi Healthcare Sector

    "It is health that is real wealth"- Mahatma Gandhi

    Introduction

    Over the past decades, the UAE health sector has witnessed a dramatic change along with impressive growth. UAE has a federal government which oversees the entire country's health sector. The government also finances almost all the non-private healthcare organizations and institutions. One of the highest level strategic plans of UAE Government is Vision 2021 which mainly plans to achieve the "world-class healthcare". The government is planning to do it by accrediting all the government and non-governmental hospitals, clinics and other healthcare organizations following the various international standards. The main focus of the UAE government and the other Emirati states to develop the modern healthcare infrastructure to ensure that adequate services and facilities are made available in the Emirates.

    In UAE healthcare is regulated at both the federal and emirates level. At the Emirates level, there are multiple health regulatory authority to administer the various health service in the Emirates level.

    It is possible to divide the entire health care sector of the UAE into the following segments:

  • The Ministry of Health of UAE
  • Department of Health which (DHO) was previously known as Health Authority Abu Dhabi (HAAD).
  • Dubai Health Authority. (DHA)
  • Dubai Health Care City Free Zone. (DHCC)
  • In keeping with a new vision of healthcare development, the Emirati state of Abu Dhabi has also developed its Emirate level strategic health care plans for the people and residents of Abu Dhabi. In the year 2014, a broad strategy and initiative were taken by Sheikh Mohammed bin Zayed Al Nahyan, Abu Dhabi Crown Prince and Deputy Supreme Commander of the Armed Forces to improve the healthcare facilities in the Emirati state of Abu Dhabi. This strategy included 85 initiatives that mainly aims to promote the various facilities and quality of the healthcare system in Abu Dhabi.

    Department of Health (DOH)

    Each entity within the healthcare sector has their own set of policies, principles, and responsibilities like taking care of essential health care services, licensing the doctors and the nurses etc. The DOH is the regulatory body of the healthcare sector in the Emirate of Abu Dhabi. This regulatory body shapes the regulatory framework in the healthcare sector in Abu Dhabi.

    DOH which was previously known as HAAD (Health Authority Abu Dhabi) first arose through the Law Number 1 of (2007). As mentioned in the Article 1 (Clause 1 and 2) of the Law Number 1 (2007), the main purposes of DOH are to achieve the highest standards in health and medicinal services and health insurance and to follow-up and monitor the operations of the health sector to deliver an exemplary standard in provision of health and curative services and health insurance. To achieve its purpose, the establishing Law Number 1 of 2007 empowers the DOH in the following ways:

  • DOH is authorized to apply the various laws, rules, regulations, and policies with a vision of developing the health sector in Abu Dhabi. (Article 5 Clause 2)
  • DOH approves the various rulings and procedures regarded as being necessary for operating health and curative establishments in Abu Dhabi.
  • DOH develops and applies the integrated systems to control the public and private health sector in the Emirates level. (Article 8 clause 12).
  • Polices and key Principles of DOH

    DOH's policies refer to decisions, plans, and activities which are undertaken to achieve various healthcare goals. DOH policies mainly focus on to outline the priorities and the expected roles of different groups related to health.

    Some of the critical principles of DOH are:

  • DOH regulations have their bases in evidence. It is mentioned in Law Number 1 of (2007), that the DOH regulatory controls will be evidence-based as far as possible.
  • DOH follows a seamless, coherent and transparent regulatory framework.
  • DOH seeks to optimize resources and reduce administrative burdens.
  • Role of DOH

    DOH has the prime responsibility of licensing and setting various standards of the healthcare professionals.

  • DOH has to determine the Healthcare professionals who require a license.
  • To establish the criteria for the practice within the law.
  • DOH has the responsibility to take regulatory actions concerning healthcare service providers.
  • DOH also sets out a framework for disciplinary action.
  • As per the Law Number 1 of (2007) the Healthcare service providers who obtain licenses will be the responsible party and ensure that they are competent to and how they act in the best interest of patients.

    Roles of Healthcare Service Providers as per Law No.1 of (2007)

    The roles are as follows:

  • Healthcare professionals have to ensure that the  Healthcare Professionals employed by them hold a license issued by DOH,
  • Healthcare professionals have to develop job descriptions for all staff employed at Healthcare Facilities operated by them,
  • The healthcare professionals have to provide medical liability insurance and professional hazard insurance for Healthcare Professionals employed by them,
  • Healthcare professionals have to co-operate with any audit carried out by DOH.
  • Licensing of Healthcare professionals in Emirates of Abu Dhabi

    The DOH establishing law requires all that all the health care professionals to be licensed by DOH to practice in Abu Dhabi. To obtain a license, health professionals must meet the PQR requirements, the language requirements, the current national or similar foreign license requirement etc. Again there is the examination requirement that applies to all Healthcare Professionals other than those who are determined by DOH to be exempt from this. As such all the healthcare professionals have to pass the examination. DOH may reject an application for a license of a healthcare professional that has not to meet all the requirements. DOH also has the power to suspend and revoke the permissions of the healthcare professionals.

    As per the DOH law, it requires that all the healthcare professionals have the duty to comply with the various policies and standards that apply to them. In general, healthcare professionals must respect the integrity of the patient. They should carry due regard for every patient and should not discriminate against any patient based on gender, race, religion, customs, economic status etc.

    Other Health Sector Entities

    As mentioned in the Law Number 1 of (2007), the government health sector entities include Abu Dhabi Health Services Company (SEHA) incorporate under the Emiri Decree Number (10) of 2007 and the National Health Insurance Company (DAMAN) consolidated through the Emiri Decree Number (39) 0f 2005.

    SEHA: (Abu Dhabi Health Service Company)

    SEHA, an independent and public joint stock company that mainly operates in all the public hospitals and health organizations in Abu Dhabi. Emiri Decree Number 10 of 2007 established the company. SEHA is a leading participant in Abu Dhabi's health sector. The company seeks various kinds of reforms to upgrade and improve the healthcare service of Abu Dhabi. For the last two decades, SEHA is promoting different types of healthcare excellence for the people of Abu Dhabi, and it is achieving goals with a competitive advantage. SEHA assume the responsibility for public health care centers and hospitals. SEHA has entered into many partnerships with the international healthcare institutions with a view of identifying the best global practices.

    Abu Dhabi Occupational Safety and Health System Framework

    This code applies to all the employers within the Emirates of Abu Dhabi for the provisions of medical emergency and first aid treatment to employees, workers and the other persons. As per this framework, any medical professionals providing services beyond the first aid should have a license to practice medicine as required by the Department of Health of Abu Dhabi. The framework mentions various kinds of training requirements for the first aiders in Abu Dhabi; for instance, all the trainers should have the valid training certificate from the recognized training providers.

    Conclusion

    In today's world more and more innovations are put into practice in the healthcare system. People are witnessing more and more transformation in healthcare. Because of this enormous transformation, we need a balanced regulatory system which can provide us with a quality health service. The regulations should be flexible and protective against risky practices.

    ]]>
    Tue, 04 Dec 2018 14:04:00 GMT
    <![CDATA[Exclusion Clauses in the UAE]]> Exclusion Clauses in the UAE

     

    The Importance of Contracts and Exclusion Clauses

    Contracts are vital documents at all levels of society. Whether in business or everyday life, contracts are formed all the time from the simplest dealings between individuals to the most complex business deals. There may be occasions wherein one of these is formed orally only, though this primarily occurs between ordinary individuals.

    Now in the case of more substantial contracts, negotiations can be a lengthy and intense process, with all parties involved looking to place themselves in the optimal positions. These negotiations are vitally important to them as they may stand for the duration of the deal and so clauses will be in place for every foreseeable eventuality.

    There can be many types of clauses possible within a contract including the power of scale clauses, acceleration clauses, integration clauses and more. One of the most vital and prevalent forms is the exclusion clause.

    Exclusion clauses, or exemption clauses as they are also known, exist to exempt a specific party from specific responsibilities should particular criteria be met. There are a few different forms of this clause which have different consequences, and they are as follows:

  • True exclusion – This clause considers a potential breach of the contract that may occur, and excludes the party that may be negatively impacted by liability;
  • Limitation – Limits the amount that can be claimed by a party for a breach of contract. This limitation is regardless of the loss;
  • Time Limitation – Places a time limit in which a claim is required to come forward. Should this time limit be elapsed, the request will then be void.
  • Of course, exclusion clauses must be agreed upon by both parties as they can potentially lead to highly beneficial exemptions for a party. Often the decided upon exclusions favor one part more than the other, likely the party writing the contract, and so the matter can be one of high complexity and generally requires both parties to be willing and fully informed. Following are the UAE regulations regarding Exclusion clauses.

    UAE Civil Code

    The UAE Civil Code governs all issues concerned with contracts within the UAE. It is a substantial piece of legislation, though exemption or exclusion clauses receive little explicit mention within it. Generally, though, the one area which widely uses exclusion clauses is in insurance. Federal Law Number 6 of 2007 (amended by Federal Law Number 3 of 2018) is the insurance law of the UAE, and Article 28 (2) states that any exemptions stated in an insurance policy require writing in bold and a different color to the rest of the text. The entity obtaining the insurance must also acknowledge the clause for it to take effect.

    Should these conditions be met in an insurance contract, then Article 1028 of the Civil Code must be taken into account. This Article is under Chapter 3 of the Code, which concerns contracts of insurance. Here are mentioned the five conditions that will result in elements of the agreement being void:

  • The situation providing for the forfeiture of the right to insurance on account of a breach of the laws unless such violation constitutes a deliberate felony or misdemeanor;
  • The condition providing for the forfeiture of the insured's right due to his delay in notifying the authorities that have to be informed, or in producing documents, if it appears that the delay was for an acceptable excuse;
  • Any printed condition relating to cases involving nullity of the contract, or forfeiture of the insured's right not shown in a precise manner;
  • The arbitration condition included in the printed general terms of the policy and not as an exclusive agreement distinct from there;
  • Any arbitrary state, the breach thereof appears that it has no bearing on the occurrence against the insurance of the event.
  • Should all of the conditions of the insurance regulations be met and avoidance of the voiding conditions stated within the Civil Code occur, then any exclusion clauses will hold weight.

    The Dubai Court of Cassation dealt with a case (27, 2009) on this very matter, and within it, they confirmed therein that the condition of having the exemption stand out was a requirement, and this was to avoid 'confusion or obscurity'. The policy must also contain a statement referring to it, and as long as this occurs, requirements for a signature on the specific clause of the contract won't be needed. Instead, the overall name for the policy will be sufficient.

    However, beyond insurance, there is little explicitly mentioned for any other sectors. Therefore, to understand the general principles, areas of the Civil Code that are not expressly related to exclusion clauses must be looked to get something of an idea of what to expect.

    In general, within the UAE, almost any contract clauses are permitted unless expressly prohibited by the law; this is so long as all the involved parties agree to the provisions. As such, if the parties agree to an exclusion clause, it will likely stand up in court. There would probably be a limit to this though as if the advantage provided to one party is too significant, and perhaps there was an element of coercion in the signing of the contract, the court may restrict them.

    The Civil Code specifies what is considered to be a void or valid contract. A valid contract as defined in Article 209 states:

  • A deal is valid if legal in its essence and characterization, issued by a qualified person, having an object that can be governed by the contract and a current, correct and licit cause, validly specified and not subject to avoid the condition.
  • As seen here, there is nothing specifically against exclusion clauses. Article 210 mentions the elements of a contract that would cause it to become void. These are:

  • A void contract is the illicit one, whether by origin or description; this may be because of a defect in one of its constitutive elements, its object, purpose or the form imposed by law for its valid formation. This contract shall not affect, and ratification cannot occur;
  • Every interested party is entitled to invoke the invalidity, and the judge to decide it ex officio;
  • Hearing an action in nullity may not occur after the lapse of fifteen years as of the conclusion of the contract, but every interested person may, at any time, raise a plea in avoidance of the deal.
  • Similar to the valid contract point, there is nothing here that outright restricts or disallows for exemption clauses.

    A specified area in which the clauses and conditionality are stated to be allowed in Article 219. In this section, it says that contracts that are liable to be canceled may have conditions that shall exist for the duration of the agreement.

    The Current State of Exclusion Clauses in the UAE

    There is no legislation specifically in place that covers these types of clauses, and even the mention is relatively minimal. The UAE Civil Code covers all areas of contracts and is an in-depth item of regulation. However, as previously mentioned, it is stated within the law that almost any clauses within a contract are acceptable, so long as both parties are willing and in the appropriate legal capacity to sign the contract.

    In time, regulations on this may become more solidified specific. For the time being though, so long as the exclusion clauses used do not violate any laws they are acceptable.

    In this way, the law allows for great freedom between the parties and has helped to build the many business deals and contracts within the UAE. It could, however, make any potential court cases more complicated and difficult than they need to be.

    ]]>
    Thu, 06 Sep 2018 11:13:00 GMT
    <![CDATA[Горная Промышленность Объединенных Арабских Эмиратов]]> Горная Промышленность Объединенных Арабских Эмиратов

    Горная промышленность на протяжении веков была движущей силой экономики. Будь то добыча полезных ископаемых, металлов или драгоценных камней, каждый вид горнодобывающей промышленности играет решающую роль в экономической деятельности многих государств во всем мире. Этот принцип ничем не отличается и в Объединенных Арабских Эмиратах, и хотя экономический рост в регионе в основном зависел от расположений нефти, горнодобывающая промышленность в регионе быстро растет и становится прибыльным источником ВВП страны. В Объединенных Арабских Эмиратах список полезных ископаемых, добываемых в этой регионе, является длинным и варьируется от меди и гипсовых месторождений до добычи металлов и драгоценных камней. С технологическим бумом в ОАЭ произошло установление того факта, что страна применяет самые передовые технологии и лучшие научные методы в горнодобывающей промышленности. Эти методы в конечном итоге подтвердили разнообразие и изобилие полезных ископаемых, доступных во многих различных Эмиратах.

    Промышленность в стране привлекает множество международных компаний, которые успешно инвестируют в этот сектор экономики. Данная отрасль не только включает в себя процесс добычи полезных ископаемых, но и утверждает, что в ОАЭ неуклонно растет как экспорт продукции горнодобывающей промышленности как сырья, так и готовой продукции. Инфраструктура в ОАЭ с оптимальным функционированием портовых сооружений и наземных транспортных средств является надежной гаванью для горнодобывающей промышленности. Для этой статьи и в соответствии с законодательством ОАЭ использование терминов разработка полезных ископаемых и добыча полезных ископаемых будет взаимозаменяемым.

     

    Закон о Добыче Полезных Ископаемых

    В каждом их Эмиратов существуют законы, регулирующие добычу полезных ископаемых в Объединенных Арабских Эмиратах; Федеральные законы, регулирующими все горнодобывающие и карьерные работы в регионе в целом. Эти правила включают:

    - Федеральный Экологический Закон;

    - Федеральное постановление Кабинета министров № 20 от 2008 года (Правила карьеров и дробильных установок);

    - Федеральная министерская резолюция № 492 от 2008 года (Руководящие принципы по разработке карьеров и дробильных установок);

    - Федеральная министерская резолюция № 110 от 2010 года (Правила карьеров и дробильных установок).

    Когда предприятие в ОАЭ хочет осуществлять горнодобывающую деятельность в регионе, оно должно получить экологическую лицензию от соответствующих местных органов власти. В отношении этой лицензии существуют конкретные руководящие принципы, которым должны соответствовать эти организации. В дополнение к инструкциям, правила также предусматривают применение штрафов в случае любого нарушения. Обязательства, предусмотренные руководящими принципами, и определяют конкретные обстоятельства и факты по каждому делу, некоторые из них включают:

    - Статья 15 Федерального постановления Кабинета министров № 20 от 2008 года. В этом законе говорится, что если любое лицо или организация, действуя или бездействуя, наносит ущерб окружающей среде в результате нарушения положений настоящей резолюции, оно несет ответственность за оплату всех необходимых затрат на ремонт или устранение ущерба и любых вытекающих убытков;

    - Статья 16 Федерального постановления Кабинета министров № 20 от 2008 года. В данном законе дополнительно разъясняется возмещение ущерба окружающей среде в соответствии со статьей 15, включая ущерб, который влияет на окружающую среду и предотвращает или уменьшает ее законное использование на временной или постоянной основе, или ухудшает ее экономическую или эстетическую ценность;

    - Федеральная министерская резолюция № 110 от 2010 года. Эта часть законодательства предусматривает восстановление каменоломен и карьеров. Статья 13 этого Закона предусматривает, что операторы карьеров должны добиваться прогрессивного улучшения после разработки своих месторождений. Это положение предполагает, что реконструкция должна выполняться последовательно в течение разумного периода времени после завершения добычи ресурсов карьера или шахты. В нем также говорится о том, как такая реконструкция выгодна:

    • Она уменьшает открытые пространства в карьере / шахте;

    • Уменьшает потенциальную эрозию почв; а также

    • Уменьшает двойную обработку или почву / отходы.

     

    Постановление министров № 110 от 2010 года

    В статье 3 Постановления министров № 110 от 2010 года содержатся руководящие принципы для разработки карьеров, это положение содержит рекомендации по бурению, разминированию, обработке материалов и транспортировке на месте. Статья 5 Постановления предусматривает общие требования. В этом положении указывается, что все операторы горнодобывающей промышленности должны предоставлять данные о производстве и эксплуатации компетентным местным органам власти и техническому подразделению министерства окружающей среды и воды.

    ]]>
    Mon, 27 Aug 2018 10:07:00 GMT
    <![CDATA[Contract law and the position of third parties]]> Contractual relations are relations we enter into every day of our lives, whether express or implied, whether formally or informally. When people go to the grocery store, at the check-out counter, they enter into a contractual relationship with the store. They accept the obligation to pay the relevant amount to the store in exchange for the store agreeing to provide quality produce. This transaction is what we consider an informal contractual relationship. On the other hand, we have formal contractual relations; it is here that written contracts with expressed terms and provisions are necessary. However, contractual requirements and obligations of two parties are seldom affecting only those parties. If one considers the instance of a motor vehicle accident, prior to such an accident, the individual drivers have both acquired motor vehicle insurance, in particular third-party insurance, this contractual relationship between the insurance company and the insured person has no bearing on the third party involved in the accident until such time as an accident takes place. Thus, such third party then becomes a beneficiary of the contractual relationship between two other persons.

    In the instance of this concept, the United Arab Emirates Civil Code Article 125, defines a contract as follows; the making of an offer by one of the contracting parties with the acknowledgment and acceptance of the other. This agreement is together with the recognition of them both in a manner that determines the effect of the subject matter of the contract and from which results in the creation of obligations upon each of them concerning that which each party is bound to do for the other. Within the UAE, there also exists the doctrine of privity of contracts, this principle entails that the rights and obligations associated with an agreement arise only between the parties to the contract and are only enforceable between those such parties, and no third party may exercise such rights or obligations.

    According to Article 129 of the Civil Code the elements that need to be present for the bringing about of a contract are: -

  • That the two parties to the agreement should agree upon the essential contractual elements;
  • The reason and subject of the agreement must be something which is capable of being dealt in and possible and defined and allowed; and
  • There needs to be a lawful purpose for the obligations arising out of the contract.
  • The abovementioned goes hand-in-hand with the doctrine of privity, the basis of this principle is on the premise that only the parties who contracted have accepted the terms, conditions, and responsibilities stipulated in the contract. According to the Doctrine of Privity, an agreement cannot confer rights or impose obligations arising in connection with it to any person who is not a party to the deal. According to Article 141 of the Civil Code, a contract may only come into existence when there is an agreement between the two parties to the contract concerning the essential elements of the obligation. Article 151 of the Civil Codes also states that if a person makes a commitment on his own and for his account, then he shall be bound by the provisions of it to the exclusion of other persons.

    An example of the doctrine of privity would be, the case of Dunlop Pneumatic Tyre Company Ltd v Selfridge, [1915] UKHL 1 (26 April 1915), [1915] AC 847 Dunlop sued Selfridge on the premise that the imposition of the promise between Dew and Selfridge was possible as Dew were acting as Dunlop's agent. The action failed because Dunlop had provided no consideration for the promise of Selfridge, for the presentation of the payment by Dew. These two abovementioned cases are both consistent with the view that the claimants could not sue because they had not provided any consideration for the defendant's promise.

    Contracts to which the doctrine applies

    Subcontractors

    In the United Arab Emirates, in pursuance of Article 891 of the UAE Civil Code, "a sub-contractor shall not have a claim concerning the employer for an amount due to him from the main contractor unless he has made an assignment to him against the employer."

    The Court of Cassation (457 Judicial Year 24) in a decision dated 20 April 2005 held as under:

    "The result of articles 891 and 892 of the Civil Code is that the liability of the main contractor remains in place as against the employer, and there is no direct contractual relationship between the employer and the sub-contractor. Thus, the contract between the main contractor and the sub-contractor defines the rights and responsibilities of each of them towards the other, and the employer may not rely on it unless the original contract provides to the contrary."

    Sub-contracting has become an essential aspect of the construction industry in the UAE, with more complex and specialized projects, it is incomprehensible for one company to have the capabilities to complete the entire task. In this instance one could consider the incompatibility of a situation where the main contractor of a project, being the sole contractor would need to maintain and pay an enormous workforce, with an extensive range of capabilities and specializations to work on such project, this is ultimately economically unsustainable.

    The use of sub-contractors has aided the reduction of project costs in the industry dramatically, such use of sub-contractors also has the advantage of sharing the project risks between the contractor and sub-contractor. The UAE recognizes the benefits and need of such sub-contracting, the law goes as far as allowing the main contractor to sub-contract the whole of the works. This sub-contracting of the whole of the works is possible, unless: -

  •  The construction contract contains a provision to the contrary; or
  • Where the selection of the contractor is due to his specific personal qualities.
  • In the context of subcontracts, which is ultimately a contract between the main contractor and a subcontractor, this means that the employer of the main contractor will be a third party to this subcontract and will thus have no rights or obligations concerning this subcontract.

    This concept brings with it questions for its applicability in the construction industry. The nature of such projects coupled with an employers' desire to be in control of certain aspects of the project has created a need for new regulation in which the employer does retain some rights in respect of the subcontract. Such reasons include the requirement for the subcontractor to provide the employer with certain warranties in connection with the work that is carried out directly to the employer, or the employer retains to the right to assign to him of the subcontractors should the main contract be terminated.

    The Court of Cassation (Case 499 of 2002 decided on 25 September 2002) has in its judgment outlined the following:

    "The work of a subcontractor - the contractor is obligated to execute his/her works in compliance with the conditions and specifications that are stated in the contract, i.e. his/her responsibility for fixing any defects caused in violation to the professional ethics. In return, the original contractor is obligated to pay the outstanding allowances of the work. Each of them has the right to retain part of the work or allowances until they get their outstanding payment. They may agree in advance that the original contractor may retain a certain amount of the allowances until the subcontractor fulfills his/her commitments. This is considered an application of the right of retention (Articles (414 - 419) of the Civil Transactions Law). The original contractor is the one who delays delivery, not the subcontractor, which deprives the original contractor of the right of retention."

    Heirs

    There is a legislative provision found in Section 3(2) of the Civil Code which provides that the heirs, beneficiaries, and successors of the contracting parties of that specific contract are included in the ambit of the contract. Article 250 of this Section states that the effects of the agreement shall extend to the contracting parties and their general successors without prejudice to the rules relating to inheritance, unless it appears from the contract or the nature of the transaction or from the provisions of the law that the effects were not to extend to a general successor. 

    Article 254(1) of the Civil Code states that it shall be allowed for a contracting party to contract in his name imposing a condition that rights in the contract are to create a benefit to a third party if he has a personal interest, whether moral or material, in the performance stated in the agreement. Article 254(2) goes further in that it provides for a direct right afforded to the third party against the Undertaker for the performance of that contractual provision, enabling him to demand the execution thereof, unless there is an agreement to the contrary. Article 254(3) then provides for the enforcement of such condition in that either the contracting party providing the provision may demand the performance thereof, unless there is a contractual provision which states that the beneficiary alone has such right.

    Article 256 of the Civil Code provides the following in respect of beneficiaries to contracts by providing for a condition in favor of a third party. It states that it shall be permissible for the recipient to be a future person or future body, and the beneficiary may also be a person or entity not specified at the making of the contract if such beneficiary is ascertainable at the time the agreement is to be given effect to following the condition.

    Agreements to which a third party has a claim

    According to Article 252 of the Civil Code, there are some exceptions to the general rule provided by the doctrine of privity, following this law, a contract may confer a right on a third party. However, such an agreement may not impose an obligation upon a third party.

    Bank guarantee

    Another instance in which a third party may become involved in the contractual obligations of another is in the specific form of a bank guarantee. Concerning Article 411 of the Commercial Transaction Law Number 18 of 1993, "a bank guarantee is a commitment issued by a bank to settle the customer's debt to a third party following the conditions agreed and included in the guarantee, which may be for a definite or indefinite term."

    Article 414 of the Commercial Transaction Law Number 18 of 1993 provides that a letter of guarantee is an undertaking issued by a bank (the guarantor) at the request of its customer (the person making the order) to pay unconditionally and without restrictions, a certain specified or determinable sum to another person (the beneficiary). In this regard, the recipient is a third party to the contract between the bank and its customer.

    Dubai Court of Cassation (Case number 284 of 2007 decided on 12 February 2008) relying on Articles 411, Article 412, Article 413, and 414 of Commercial Transactions Law discussed the role of the bank when dealing with bank guarantees, it reads:

    "The bank will not be regarded, in respect of its obligation under the bank guarantee, as being the proxy of its customer.  Rather, it will have an obligation as a principal.  The obligation of the bank that issues the letter of guarantee is separate from the obligation of the guaranteed debtor, in the sense that it is separate from any other relationship apart from the relationship between the bank and the beneficiary, as is the case in respect of a documentary credit.  That is to say, the obligation of the bank that issues the guarantee does not follow the obligation of the debtor with regard to its validity or nullity, because the bank is always bound by the letter whatever be the status of the guaranteed account holder, and whatever may happen to the relationship between the guaranteed account holder and the beneficiary under the letter."

    Documentary credit

    Under Chapter 4 of the Commercial Transaction Law, Number 18 of 1993, documentary credit involves the rights of third parties into the contracts of another. Article 428 of this Law provides that this agreement is a contract according to which a bank opens a credit at the request of its customer (the person ordering the opening of the loan) within the limits of a specified amount and for a definite term in favor of another person (the beneficiary). This agreement is against the security of documents represented goods transported or intended for carriage. This chapter states further that a documentary credit contract is deemed to be independent of the contract which caused the opening of the credit, and the bank shall remain a stranger to such an agreement.

    Discharging the debt of another

    Article 333 of the Civil Code provides for another exception in that another person takes care of the liability of another person concerning a previous agreement. This Article states that should a person discharge the obligations of a third party upon such third parties directions, such person shall have a right of recourse against the person s directing him for what he has performed on his behalf, this person will take the position of the original oblige in his right to claim against the obligor. 

    However, this Article does provide a limitation to such position in Article 334, such Article states that should the person discharge the relevant obligations of the third party, without the necessary directions, there will be no right of recourse concerning the obligor for the discharge, unless the following circumstances are present, namely those found in Article 325. This Article states that if pledger dischargers the debt of a third party to release his property pledged by way of security for such debt, he shall have a right of recourse against the debtor for the money he has paid.

    Dubai Court of Cassation (Case 163 of 2007 decided on 11 September 2007) held as under:

    "It is settled law in the precedents of this court under the provisions of Articles 325 and 334 of the Civil Code. Whoever pays the debt of another without being ordered by him to do so is not entitled to have recourse against the debtor for what he has paid, unless he has been compelled by necessity to discharge the debt.  In that latter event, the payer will be regarded as the proxy of the debtor in payment of the debt.  The assessment of the circumstance of necessity is a matter of fact within the independent jurisdiction of the trial court, provided that its assessment is sound and based on matters proved in the papers."

    Third party insurance law

    The provisions for third party insurance, which provides a beneficial right to third parties concerning an agreement between the insurer and the insuree is another exception to the application of the doctrine. In the United Arab Emirates, such authority is the Unified Motor Vehicle Insurance Policy Against Third Party Liability issued according to the Regulation of Unifying Motor Vehicle Insurance Policies according to Insurance Authority Board of Directors' Decision Number (25) of 2016. This provision provides that the entering into of any policy as per the law was to cover liability towards a third party. Thus, the entering into of this policy or agreement was for the benefit of an unspecified third, additional party.

    Criticism of the Doctrine of Privity

    Objections that have developed at the doctrine of privity are that it failed to give effect to the expressed wishes of the parties and could lead to results regarded as fundamentally unjust and parties that should have benefited according to the contract did not receive what was intended. Due to a large number of exceptions to this rule, the law has mainly become complicated, and ultimately the doctrine has become commercially inconvenient.

    ]]>
    Tue, 07 Aug 2018 11:29:00 GMT
    <![CDATA[Guide on Initail Public Offerings in the GCC 2018-2019]]> Introduction

    The Initial Public Offering (IPO) is the first occasion on which a company will have shares put up on a stock market. An investment bank will underwrite the IPO and will arrange for the listing of the shares on one or more stock exchanges.

    An IPO is often a significant step towards rapid growth for a company, and having shares be available on a stock exchange allows for quick raising of funds

    The UAE Securities and Commodities Authority (SCA) governs and produces legislation by which the Dubai Financial Market (DFA) must abide. The DFA reinforces economic growth within the country, and it does so by encouraging IPO's with attractive benefits such as ongoing access to capital required to further fund growth, succession planning and fair valuation of shares to name a few of the incentives.

    Additionally, there are two Financial Free Zones in the country. The Dubai International Financial Centre (DIFC) receives regulations through the Dubai Financial Service Authority (DFSA). The Abu Dhabi Global Market (ADGM) which was established through Federal Law Number 8 of 2004, Federal Decree Number 15 of 2013, Cabinet Decision Number 4 of 2013 and Abu Dhabi Law Number 4 of 2013 is governed by its three authorities which are the Registration Authority, Financial Services Regulatory Authority (FSRA) and the ADGM Courts.

  • Initial Public Offering in the UAE
  • Securities and Commodities Authorities
  • Dubai Financial Market (DFM)
  • Introduction
  • Critical benefits for companies listing on DFM
  • Key IPO stages
  • Initial Public Offering on Nasdaq Dubai
  • Introduction
  • Procedure
  • Timeline for admission to trading for debt
  • Admission fees
  • Flexibility
  • Global and regional branding
  • Liquidity
  • Regulation and law
  • Listing criteria on Nasdaq Dubai
  • Incorporation
  • Financials
  • Management
  • General suitability
  • Working capital
  • Abu Dhabi Global Market (ADGM)
  • 51. Introduction

    5.2 Key benefits of the IPO

  • Initial Public Offering in the Kingdom of Saudi Arabia
  • Introduction
  • Initial Public Offering in the Sultanate of Oman
  • Introduction
  • IPO process in the Sultanate of Oman
  • Disclosures in the prospectus
  • Initial Public Offering in the state of Kuwait
  • Introduction
  • Listing approval
  • Additional requirements
  • Initial Public Offering in the Kingdom of Bahrain
  • Introduction
  • Listing requirements and process on Bahrain Bourse
  • Public scrutiny post IPO
  • Conclusion
  • References
  • INITIAL PUBLIC OFFERING LISTING IN UAE
  • The future of IPO looks good both on the global front and also from a national perspective. The outlook for 2018 is very promising, and if IPOs in the country achieve their targets, 2018 could be a substantially successful year. Listed in 2017 were two IPOs, and these were Orient UNB Takaful Insurance raising $16.3 million and Emaar Development listing was for $1.3 billion. On Real Estate Investment Trust (REIT) listing it was Nasdaq Dubai for Emirates NBD Asset Management at $105 million and on Abu Dhabi listing, Adnoc raised $851 million. Q2 of 2017 saw somewhat of a decline as market volatility weighs on investor's sentiments.  The only IPO which floated a total of 36 million shares by raising proceeds of $96 million was of Jadwa REIT Alharamin Fund. The Reason IPOs are pushed for so strongly and are so successful is often due to the open nature of the business they bring, and also the support they receive. High anticipation of main IPOs is from Abu Dhabi Ports, Sanaat, Gems Education and Emirate Global Aluminium ahead of Aramco sale. The estimation is around 5 IPOs will be able to raise close to $8 billion.

  • SECURITIES AND COMMODITIES AUTHORITIES (SCA)
  • In this section, the SCA shall illustrate the function to authorize the companies to commence the IPO. Companies willing to conduct IPOs shall enter into a contract with a Financial Advisor as per Board Resolution Number 11/R.M of 2016 on the regulations of issuing IPOs for public joint stock companies. Said Financial Advisor shall:

  • Allow for qualified speculators to gather and present a report of the organization's business and exercises.
  • Analyse the conclusion the specialists reach on their underlying impression of the estimation of the offers for membership by the Issuing organization.
  • Coordinate with the Issuing organization in examining the opinions of the speculators to settle on a choice on the points of interest of the planned offering and the value scope of the offers subject of the advertising.
  • Work with the issuing organization for setting up the preliminary plan in which the value scope of offers, and this will then be presented to the SCA for endorsement as a preparatory advance toward a declaration of the offering, though not for the declaration time frames indicated in statement (1) of Article (12) in this regard.
  • Submit offers to financial specialists as for the offers to be provided by the Issuing organization.
  • Lead informative and instructive workshops for financial specialists to clarify the Book Building procedure to them.
  •  

    ]]>
    Sat, 21 Jul 2018 13:32:00 GMT
    <![CDATA[Agency Laws in the GCC Countries ]]> AGENCY LAWS IN THE GCC COUNTRIES

    Introduction

    The extension of the multinational partnership is either setting up its subsidiary in remote purview or to tie up with the local organization in a foreign jurisdiction. United Arab Emirates (UAE) is one of the distant locals where international organizations are going into office concurrences with the Emirate nationals keeping in mind the end goal to grow their business in the UAE since the UAE being a well networked international port. A global entity wishing to set up a company offshore with cost-effective investment UAE is a standout amongst the most advantageous alternative where the foreign companies either enters into distribution agreement or makes an arrangement with the commercial agencies to expand their business with the locals. The UAE Agency Law manages these commercial agencies and distribution agreement in the UAE according to amended Federal Law 18 of 1981usually known as Agency laws. Federal Law 13 of 2006concerning agency law was revised and revoked in 2010. However, the Federal law 18 of 1981 was a reestablishment.

     

    The Emirate of Abu Dhabi established Federal Law Number 11 of 1973which centers around the task and control of business office exercises. This arrangement of Federal Law Number 11 of 1973had constrained the foreign business in Abu Dhabi and had created various challenges for the government about essential regulation carried out for commercial activities additionally talked about in this guide.

     

    These agency agreements have a positive effect on UAE's economy since there is an increment in Foreign Direct Investment (FDI). Indeed, even the previous Ministry of Economy SheikhaLubna Al Qasimi states that "The new revisions will certainly boost the financial market in the UAE. This law declared out of the longing to improve and keep up steadiness in costs and guarantee that organizations are not controlled to expand costs." Furthermore, the administration of UAE His Highness Sheik Khalifa bin Zayed Al Nahyan, President of the UAE and His Highness Sheik Mohammed receptacle Rashid Al Maktoum, Vice President and Prime Minister of Dubai, they all are resolved to offer help for the development of the economy in the UAE.

    STA Law Firm house one of the leading corporate attorneys in the entire of UAE. We believe that commercial agency laws for the protection of local agents from the termination of agency agreements by the foreign entity without any legitimate reasoning. Besides, the comparative study of agency laws has been done between UAE, Oman, Kuwait, Bahrain and Saudi Arabia.

    CONTENTS

    1.Agency Laws in United Arab Emirates

    1.1Definition 

    1.2Types of Agencies

    1.3Sham Agency Registration

    1.4Termination of Sham Agency Agreement

    1.5Termination of Agency Agreement

    1.6UAE Court's jurisdiction in Commercial Agency Agreement

    1.7Commercial Agency Committee

    1.8Arbitration in the UAE

    1.9Penalties

    1.10Agency Laws in Abu Dhabi

    2.Commercial Agency Laws in Oman

    2.1Introduction

    2.2Definition

    2.3Registration of Agency Agreement

    2.4Kinds of Agency Agreement

    2.5Ownership

    2.6Termination of Agency Agreement

    3.Commercial Agency Laws in Kuwait

    4.Commercial Agency Laws in Bahrain

    4.1Introduction

    4.2Definition

    4.3Ownership

    4.4Exclusivity

    4.5Termination of Agency Agreement

    4.6Penalties

    5.Commercial Agency Laws in Saudi Arabia

    5.1Introduction

    5.2Definition

    5.3Features of Agency Law

    5.4Ownership

    5.5Commission

    5.6Choice of law and Jurisdiction

    5.7Termination of Agency Agreement

    6.Conclusion

    7.References

    Overview

    The definition of commercial agency law as per Federal Law Number 18 of 1981(the UAE Agency Law) 'any disposition whereby an international company is represented by an agent to allocate, vend, tender goods or services within the UAE for a charge or profit.'  The rights of the Emirate agents are only protected under Federal law 18 of 1981(UAE Agency Law)if the registration of agency agreement with the UAE Ministry of Economy. Unregistered agreements do not render the rights of Emirate agents or protect them from the termination of agency agreement by the foreign principal under UAE Agency Law. Additionally, UAE commercial agent should hold a valid and appropriate license in each Emirate along with enrolment with the Chamber of Commerce in each relevant Emirate.  Article 4of the UAE Agency law (Federal law 18 of 1981as amended) states that there should be a straight connection between a UAE commercial agent and the foreign principal without any interference by the regional or multi-country sales agent. On the other hand, Article 5of the UAE Agency Law (Federal Law 18 of 1981as amended) states that ' A qualified commercial agent will be regarded selective in its domain, however, enables an international organization to delegate a different commercial agent for every emirate.' The Federal Act, 1981defines Commercial Agency as 'the representation of the principal by an agent for distribution, sale, display or provision of any commodity or service within the state (the UAE) in consideration of any commission or profit.' Here the word principal includes the manufacturer, whether based in the UAE or overseas. A common phenomenon observed in all the GCC countries is that if there is no registration of commercial agency agreement, then it will not be recognized by the courts or an agent will not have solid ground to defend himself from the termination of an agency agreement.  Therefore, commonly tan here are two types of agency agreements such as:

    I.    Registered agency agreements-  an agent can register commercial agency agreement before the Commercial Agency Registrar to protect themselves from an illegal termination of an agency agreement.

    II.    Unregistered agency agreements-  an agent enters into an agency agreement with the foreign private entity without registering the agreement with Commercial Agency Registrar then it is recognized as unrecorded agency agreement. Most of the courts in the GCC countries do not recognize or can protect a local agent from an invalid termination of an agency agreement. 

    AGENCY LAWS IN ABU DHABI

    The Emirate of Abu Dhabi enacted Abu Dhabi Law Number 17of 1969which states that "no person is permitted to conduct any commercial activity before obtaining a license by the commercial License Law of 1969." This provision of law had created commotion in the commercial market which limited the Foreign Direct Investment in Abu Dhabi. Therefore, Abu Dhabi Law Number 11 of 1973repeals Abu Dhabi Law Number 17 of 1969 which encourages Foreign Direct Investment as it focuses on operation and regulation of commercial agency activities. In Abu Dhabi, a business agent does not have exclusive rights over the products of the foreign entity once they enter commercial agency agreement as an agent is a mediator. An agent is a mediator for foreign companies to set up their business in Abu Dhabi because without an agent a foreign corporation cannot expand their business in the UAE.

    According to Abu Dhabi Law Number 11 of 1973it is not explicitly mentioned that registered or qualified agent would be protected under a specific provision if the foreign entity terminates agency agreement without any valid reasoning.

    Furthermore, in other jurisdictions of the GCC countries, qualified agents are protected under their specific agency laws if the registration is agency agreement is carried out before the Commercial Agency Registrar. This guide entails in detail about agency laws in the GCC. Click here to read more.

    ]]>
    Thu, 14 Jun 2018 15:28:00 GMT
    <![CDATA[Company Formation in Kuwait Free Trade Zone]]> COMPANY FORMATION IN KUWAIT FREE TRADE ZONE

     

    Kuwait, also known as the Fruitful Land of the Gulfis considered to be a land of opportunities.The country's richness lies in the natural resources like oil and gas but also the real wealth of the nation lies in its human capital as people are highly educated and dynamic. Its presences are in the northwestern corner of the Persian Gulf.Kuwait is a modern city with mingling skyscrapers, apartment buildings, and mosques. In all of the GCC countries, Kuwait is one of the most urbanized countries. Kuwait is recently appreciated due to its extended foreign investment in the free trade zones specific focus on the free zone Shuwaikh.

    The first ever free zone in Kuwait, Kuwait Free Trade Zone (KFTZ) came into existence in 1999 in Shuwaikh port, which is the country's central shipping business facility, on a 1.5 million square meters area. KFTZ came into existence under the Law number 26 of 1995 allowing Kuwait's Ministry of Commerce and Industry to incorporate free trade zones in Kuwait (KFTZ Law).

    The Background Check

    The Kuwaiti Government signed an agreement with a privately-owned establishment, National Real-estate company (NERC) to manage KFTZ, since its establishment until 2006. Where the NREC has the authority to retain 20% of the net operating profits of the free zone and rest will be offered to the government. NERC made several advancements in KFTZ such as rehabilitating the port to ensure foreign investment, unlimited supply of electricity and water to free zone companies, easy road access, and state-of-art infrastructure.

    However, due to several disputes and allegations that NERC failed in managing the free zone, the Kuwaiti cabinet council passed a resolution number 507 of 2006 whereby terminating NREC from the management of the open area subsequently suspending all their activities. After that, in  2007, the Kuwaiti government passed on the responsibility of managing the free region to Public Authority for Industry (PAI) which is yet in-charge of the management of the openarea.

    Why KFTZ?

    The primary objective of KFTZ was to resuscitate Kuwait's economy by enlarging investment opportunities and to ensuring Kuwait's healthy business environment by making it a business center in the whole region. The free zone provides several benefits including but not limited to warehouses, open lands, exhibition halls, insurance agencies, courier companies, hotels and more. It further offers following advantages:

             i.            Complete hundred percent ownership;

           ii.            Free from corporate and income tax;

          iii.            Exemptions from customs duties on imports and exports of goods from the KFTZ;

         iv.            No restrictions on capital;

           v.            No limitations from the foreign exchange Department;

         vi.            Easy access to international airports;

        vii.            Free zone authority cannot confiscate foreign assetsotherwise will grant compensation worth market value;

      viii.            Adequate rewardoffered to foreign investors in case of violation of any rights and privileges;

         ix.            Tools and equipmentutilized within the free zone are free from taxes and customs duties;

           x.            An option to refer contractual disputes to international arbitration centers.

    An establishment may seek different types of licenses from the free zone, considering the activities of the company such as following:

             i.            Commercial/ Trade License;

           ii.            Industrial License;

          iii.            Investment license;

         iv.            Service License.

    In the licenses above, the company can hold hundred percent (100%) ownership without any interference from the local sponsor. The free zone does not restrict companies on the currency or any export and import activities with the openregion. However, there isa minimal limitation on the attachment or seizure of the capital so invested by the foreign companies.

    The companies wish to establish their presence in the free zone must obtain a license to carry out one or more of the permitted activities mentioned in the KFTZ law. Importantly, companies can only conduct those activitiesoutlined explicitly in the trade, commercial or service license. Below table will assist the investors planning to establish their presence in KFTZ:

     

    Particulars

    Free Zone Establishment/LLC

    Application form

    Required

    Famous Activities

    Manufacturing and Exports

    Timeline for obtaining a license

    Five months

    Timeline for a Lease agreement

    1 Week

    Corporate Tax Rate

    0%

    Limited Liability Entity

    Yes

    a Government Grants

    Available

    The requirement of Government Approvals

    Yes

    Requirement for GCC director or Manager

    No

    Minimum Share Capital

    USD 3,300

    Right to bid for government contracts

    Yes

    Right to secure trade finance

    Yes

    Average Costs for setting up

    USD 48,000

    Minimum Number of Partners

    2

    Future Goals of KFTZ

     

     

     

     

    With a clear view to support and increase the investment in the free zone, the Ministry and Commerce Industry promulgated a proposal to transfer the management of the free trade zone from Public Authority Industry (PAI) Kuwait Direct Investment Promotion Authority (KDIPA). The new KDIPA also has the authority to manage new free zones such as Abdali and Nuwaiseeb to However; the transfer is not yet final stage.

    The Kuwaiti government, considering the increased investment in the KFTZ has announced to further establish new free zones on five of its islands. As recently quoted by Ministry of Social Affairs and Labor and Ministry of State Department and Planning Affairs that the project will support the Gulf state to expand the industry from the oil sector to international investment. It further aims in offering varied job opportunities to Kuwaiti's citizens and limit the dependency of government funds.

    The project is now in under control of Supreme Council for Planning and Developmentand to the cabinet as a matter of urgency. The government is already in progress of creating a harbor on the Boubyan island which is a multibillion-dollar project with an objective of inviting national and international private companies for financing and executing the free zone operations. The government is under planning to complete the project in 2030 with plans to introduce various incentives to attract foreign investors.

     

    ]]>
    Mon, 14 May 2018 10:43:16 GMT
    <![CDATA[RAK Maritime Free zone Authority]]> COMPANY FORMATION IN RAK MARITIME CITY 

    The hidden gemof UAE, theemirate of Ras Al Khaimah (RAK) is a mesmeric stretch of golden beaches, terracotta desert, backed up by the fiercemountains of Hajar and an ocean of Bedouin Oasis is just out of the shadow of Dubai's extravagant skyscrapers. Thepearly-whiteand multi-domedSheikh Zayed Mosque overlooks the Al Qawasim Corniche, a paved boulevard with kiosks, benches,and restaurants fronting the creek.RAK is also the gateway to the glorious Musandam Peninsula, an enclave of Oman. This emirate has some of the most diverse landscapes in the country, from opulent date palm havens to slithering sand dunes and theunambiguous Rocky Mountains. Captivating Gulf waters not only bring adventures but also a sea of business opportunities to expats. The UAE's northernmost emirate RAK is not just limited to its diverse scenery ranging from sandy beaches to sprawling oases but the tranquil Gulf comes with numerous business opportunities.  In recent years, RAK has witnessed exponential growth, resulting from the free-trade zone established and other luxurious tourist spots.

    UAE's fast-rising economy and culturally diverse businesses and industries attract corporations from all around the world. Free Zones in the UAE are specific areas that have a distinct set of rules than the rest of the UAE and has aunique framework of rules for tax, import, and customs. The UAE has several free zones across Dubai, Abu Dhabi, Sharjah, Fujairah, Ajman, Ras al Khaimah and Um Al Quwain and RAK Maritime city is one unique free zone amongst others. Free-trade zone exemptions are:

  • 100% foreign ownership of the corporation
  • 100% import and export tax exemptions
  • 100% repatriation of capital and profits
  • Corporate tax exemptions for up to 50 years
  • No personal income taxes
  • Support with labor recruitment, and supplementary support services, such as sponsorship and housing.
  • Each Free Zone has outlined around at least one business industry area and offered licenses to organizations inside those classifications. An autonomous Free Zone Authority (the FZA) represents each free zone and is in charge of issuing Free Zone working licenses and helping corporations with setting up their businesses in the Free Zone. Financial specialists can either enroll another corporation as a Free Zone Establishment (theFZE) or just set up a branch or agent office of their current or parent organization based inside the UAE or abroad. An FZE is a limited risk organization represented by the standards and directions of the Free Zone in which it is set up. With the exception of getting nationality in the UAE, the arrangements of the Federal Law Number 2 of 2015 concerning the Commercial Companies Law (the CCL) don't make a difference to FZEs, given that the Free Zones have exclusive arrangements directing such corporations.

    The History

    Ras Al Khaimah has five Ports which play a major commercial window to the rest of the World and are essential to the Emirate's economy which includeSaqr Port, the region's largest bulk handling terminal, Al Jazeera Port, focusing on dry docks and ship repair, Al Jeer Port, which houses livestock handling facilities and yachts, and RAK Khor Port, which provides warehousing and where plans are being developed for cruise terminals and RAK Maritime City. RAK Maritime City is a part of the Free Zone facility, which is one of the most emerging business hubs in the Middle East offering itsconveniently-located logistics gateway, excellent infrastructure, flexible company set-up agendas and technical support services.RAK Ports provides a wide range of high-quality marine services including pilotage, harbor towage, vessel mooring, vessel traffic control, hydrographic surveying, emergency response, aids-to-navigation and lay-up at anchorage for all the vessels. The team of trained and well-experienced pilots, tug-crew, technicians, surveyors, and a team of staff led by The Harbor Master support the foregoing services.

    RAK's location as the first port of call into the Gulf with5km of quay wall for dedicated berths and private jetties is unique and encourages industries to establish their businesses. RAK Maritime City Free Zone Authority inspires long-term partnerships with the industries connected with the maritime. Maritime City pursues to attract between 40 and 50 major tenants with plots starting from 25,000 square meters and lease agreements ranging from 25 to 99 years. RAK Maritime City FZA is not just for business owners but also aspires to create up to 5,000 jobs for Ras al Khaimah.

    What is different about RAKMC?

    RAK Maritime City is the second free zone in Ras al Khaimah, an emirate with scarce oil and gas holdings which was created by virtue of Emiri Decree in December 2009. The Decree has also mentioned that clear boundary of RAK maritime city.As a result, the emirate has long relied on other resources such as quarries to build up a cumulative trading business and cement factories. Maritime City will be a great economic booster for RAK as it encourages foreign expats to establish their corporations with Free Zone privileges. Maritime city seeks to attract businesses as a "one-stop shop" with the benefits of a free zone environment, a state of the art, 21st-centuryharbor infrastructure within a developed and established aport. It aims to provide a cost-efficient and highly safe environment for its tenants, as well as quality industrial and maritime facilities, superior logistics and high-qualityamenities.

    The construction of RAK Maritime City is a key component of the Emirate's economic roadmap to build an advanced ports' network in RAK. This will empower the emirateto be recognized as asignificant shipping and freightcenterthat will be able to compete on the global level as a major logistics and trans-shipment hub in the Gulf. RAK Maritime City is zoned into areas for specifieduse like retail, warehousing, general cargo handling,industrial production and manufacturing, tank storage and shipbuilding or repairs. RAK Ports, managed by Saqr Port Authority, has been given the responsibility to oversee the growth of the maritimeindustry in the region and drive the economic development of Ras AlKhaimah.

    RAK Maritime City Free Zone covers an area of several million square meters, distributed into zoned plots which can accommodate businesses of different sizes across multiple industrial sectors. It's strategic position as the nearest Free Zone the Strait of Hormuz has unique advantages in terms of fuel cost savings for tenants, and its port functionality and features in terms of entrance draft depth, deep-water berths, exclusive jetties and available quay wall. 

    RAK Maritime City Free Zone supports through every step of the process for the establishment of the corporation from the initial application, company registration, facility leasing, the securing of licenses, permits and residence and more to launch the business with ease and within the legal framework of FZA and the respected Emirate. Today each of the five ports in the Emirate has a defined role, specializing in a shipping or transport role, that matches the Emirate's ambitions to be recognized as a modern maritime hub. RAK Maritime City company connects all the businesses in the company to alarge area of million square meters. The free zone currently accommodates thousands of businesses with varied scales which belongs to different sectors.

    The following table is for the investors willing to establish the company in RAK Maritime City, the table provide the list of documents required for different types of company to be registered in the free zone:

    Document Title

    Free Zone Establishment

    Free Zone Company

    Branch

    Application form

    Business Plan

     

     

    Letter of Intent

    Audited Financial report

     

    Company Profile

     

    Bank statement of past six months

     

     

    Letter of reference from bank

     

     

    Passport copies of shareholders

     

     

    Power of attorney, specimen signature, passport copy and resume of manager

    NOC from sponsor

    Register certificate from parent company

     

    MOU and AOA of parent company

     

    Board Resolution of Parent Company

     

    Appointment letter, power of attorney, specimen signature and passport copy of legal representative

     

    Power of attorney, specimen signature, and passport copy of director

     

    Power of attorney, specimen signature and passport copy of secretary

     

     

    ]]>
    Tue, 24 Apr 2018 12:44:49 GMT
    <![CDATA[Tender and Procurement Law of Abu Dhabi]]> Tender and Procurement Law of Abu Dhabi

    What are Tender and Procurement processes?

    Tender and procurement are two processes that go hand in hand. You cannot have one without the other, and these processes are ones which occur in a multitude of countries and jurisdictions around the world. In a world with as many complexities as ours, it would be near impossible for a single business to perform at the top level in all different aspects due in large part to the vast number and extensive variety of elements of a company. There will almost always be another entity that can do a specific aspect of work of a business better than that business itself.

    Below mentioned is a rudimentary example of the tender and procurement process. In this instance, IT projects within a fashion company need to be completed. In terms of such work, they would have to call in specialists. Tender and procurement work on the fundamental principle that companies subcontract parts of their business to those who have superior capabilities in the relevant fields. This principle can be seen on a scale much more significant than the abovementioned.

    Tender is a process through which a party, known as the promoter, will first specify what service they are looking to obtain. They can then begin a bid, which is what is known as a tender. Interested parties will then be able to come up with proposals on how exactly they would go about meeting the specifics of the requirement. The promoter will have provided specific qualifications as to how they would want the service to be acquired or completed, and this would include a deadline, etc. The party would then select from the biding entities based on their proposals, and then the winning bidder would be contracted to perform the work.

    Procurement is the other side of this story. While the tendering party is looking to bid away work to the best potential entity, the procurement party engages in a bid in a tendering to procure a project from the promoter and obtain contracts in this way. There are entire businesses which rely on acquired work, and these types of companies often specialize in specific industries.

    One of the most common tenders is usually the government and public sector themselves, as they outsource activities to private businesses, and this can include immense scale and essential projects. However, any company can start a tendering. There are usually differences between a public tender and a private tender, with individual bids often being an integral part of the businesses operations and a required process. However, this is often not the case with public tenders.

    From a global perspective, public sector tendering is massive business, and not just anyone can win a bid. To give an idea of the scale of this, in European countries (or at least those that are part of the EU), the laws that dictate tender and procurement may originate from within that country, though there are general underlying EU rules on the matter. This inclusion shows that the issue is on a scale where the attention of the EU is upon it.

    The UAE's Approach

    The primary law governing tenders and procurement in the UAE is the Law Number 6 of 2008 and all issues relating to this matter including the legislation are under the wings of the Department of Finance (DOF). The DOF is in Abu Dhabi, and they provide public financial services to the Abu Dhabi Government. Since its creation in 2008, there has been an amendment of the law, and it is now available on the DOF website and acts as a manual which is intended for all government entities.

    As per the law, there should be a standard format that government contracts should look to follow and this general standard applies in most cases, except for the area of construction contracts according to Article 5 section 1 of Law Number 6. While this may be the case, there may indeed arise occasions where the standard contract doesn't contain certain elements that may be required. In this case, Article 5 section 2 states that any and all exceptions must be approved of by the Purchases section head and reviewed by the legal division at the specific government entity that is the promoter. This provision is the minimum requirement for any diversion from the standard.

    Under Article 7 of the guide introduces the concept of purchasing section. This section is the group that is responsible for securing the government entity throughout their deals with external parties. Some of their key responsibilities include:

  • Ensuring the best prices and facilities are obtained for the government entity
  • The outsourcing of work to suitable entities
  • Also ensuring that the work is completed and takes into account the appropriate locations, times and quantities
  • The purchasing section is also able to make purchases on materials and related items through bids of the value of between AED 25,000 and AED 250,000. Anything above this must be taken up with the Tenders and Auctions Committee via memorandum.

    On top of this, there are three primary responsibilities which the purchasing section must watch over. These are:

  • To collect information regarding materials and suppliers, and to maintain those records
  • To determine the standard specifications of the items and materials
  • To ensure quality assurance on the topic of purchases activities tender documents and evaluations and consider the standards of the sustainability, environmental protection and SME and local economy support.
  • Article 9 considers the ethical responsibilities of government entities while they are in the processes of tender and procurement. The work is to be completed with the utmost transparency and in a highly professional manner. The aim of government work, in the end, is to move the country progressively forward, in a respectable and dignified direction. This aim includes not taking on contracts with those whose intentions are only to progress their matters rather than thinking of the more significant concern of the nation as a whole. I order to achieve this more easily; the government entity should look to educate and instill these concepts into their employees, and thus creating a positive atmosphere and ensuring that the proceeding contracts and outcomes are only favorable.

    Article 12 introduces the requirement for government entities to set up a Tender and Auctions Committee. This job falls to the chairman of said entity, and there is a specific structure with is also mentioned in the Article. The committee must be composed of a minimum of 5 members and requires a chairperson and their alternate. This committee will meet to discuss and further all elements of the tender and Auction activities, and the voting system within the committee works on a simple majority basis with the casting vote going to the committee chairman. Their primary purpose is to govern the overall strategies and future of tenders and procurement for their respective government branch.

    The manual proceeds to discuss further committees within the entity and outlines procedure rules across all stages of tender and procurement.

    The Future and PPP

    Private Public Partnership (PPP) are very much as they sound. The PPP is a partnership formed between public government bodies and private external entities. Within this relationship, each party has its role to play, and of late, the matter has seen a rise of attention in the UAE. With the implementation of this concept within the country, the hope is that a culture of growth based on knowledge, expertise, and diversity will begin to flourish and help the economy to grow to new strengths. It will also expand business within the country, and the hope is that it may bring in foreigners and their innovations and investments.

    What has given hope and light to this is the recent introduction of the UAE Cabinet Resolution (1/1) of 2017. Similar to Law Number 6 of 2008, this piece of legislation behaves as something of a manual that is to be followed to attain the abovementioned and the location of such is on the Ministry of Finance website.

    Chapter two of the manual covers the contracts between private and public parties in an overview. 2.1 states that the agreements between these parties are for the good and growth of the country and the projects should look to improve the infrastructure of the nation. These contracts are to be long-term and should use to their advantage the resources, knowledge, and expertise of the private party. The projects and works provided are not intended for the maximization of profit of either of the parties to the contract. Preferably the primary focus should be on the growth and well-being of those sectors of the UAE.

    The announcement of the initial project under the new PPP law was in March of 2018, and the plan is to build a new fully automated carpark with over 1,200 spaces, and the structure would also house the Supreme Court. The project is purported to take around three years to complete, and cost around AED 290 million.

    Projects such as this demonstrate the goal of the PPP scheme. In this specific case, the construction is commencing of a car park that will provide and ease the lives of hundreds and thousands of individuals within the city, and this is just the first project of many more to come. It will allow for highly valuable and needed projects to rise and be run by private sector experts allowing for high quality and innovative expansion. The setting in motion has taken place for the achievement of the goal of growing the country's economy and expanding the infrastructure to achieve the UAE of the future.

    ]]>
    Wed, 18 Apr 2018 00:00:00 GMT
    <![CDATA[Acquisitive Limitation Period]]> Acquisitive Limitation Period

    Introduction

    "The right is not going to be lost if someone behind is demanding it" which means that one will not lose his right as long as there is a request. Hence, the legislators derived the Statute of Limitation, which says that the parties must adhere to the time limit determined by the law and if not the effect of limitation period may lead to losing rights or may lead to gaining them. Period of limitation is of two particular types such as personal rights, which are the rights and obligations of an individual, and property rights, which are the rights to the specific property. However, the impact of limitation periods differs from personal powers which can only be the subject of losing limitation as you cannot gain private power with limitation prescription.

    The property rights may also be lost (except in ownership right) by limitation period, as one should obtain it with acquisitive limitation. While limitation period assumes a negative status, it is not requesting the right by the creditor or not using it; the acquisitive restriction requires a favorable situation which is possession. The two systems share the element of time passing.

    Additionally, the Federal Law Number of 1985 on UAE Civil Code (the Civil Code) imposes a limitation on criminal matters. The law states that the party cannot file a criminal complaint upon passage of limitation period and the public prosecutor has the authority to reject the case due to the expiry of the limitation period. The following article discusses the period of limitation in two types of cases that are in civil matters and criminal matters:

    In the Civil Code:

    Under the UAE Civil Code, the period of limitation is in two different sections as follows:

    Acquisitive limitation period

    According to Article 1317 of the Civil Code, "whoever possesses a movable or an unregistered property as his own or has a real right over the property (movable or immovable). Also, the possession is continuing without ceasing for 15 years shall not be actionable in property or rem by any person who has legitimate justification."

    Short-Term Limitation Period

    On the other hand, Article 1318of the UAE Civil Code states that

  • "If there was possession of unregistered real estate property and the ownership accompanies with good intentions with a valid reason, the limitation period will be for seven years;
  • The compelling reason is a document, or an incident proving the possession of the property. Following should be considered as the valid reason:
    •            Will or inheritance transferred the ownership rights;
    •            A gift between alive people for compensation in return or without;
    •            Selling and barter."

    It is evident from the provisions mentioned above that the acquisitive limitation period for property rights is two types, a long-term limitation period and a short-term limitation period. Where the long-term limitation period is for fifteen (15) years without any interruption. On the contrary, the basis of short Acquisitive Period is on good faith and reasons, such as buying a property from a person who does not have the ownership rights and the buyer was not aware before signing the contract. However, if the owner would have any information in a defect in ownership, then it shall not be deemed as a valid reason. Good faith is sufficient to be available at the start of the possession. 

    In the situations mentioned above, it is required for the possession to be on the property which is not registered. However, if the property undergoes registration under the name of the owner, then the ownership if not applied regardless of the duration of such possession.

    The court of Cassation in Dubai Court of Cassation dated 13-3-32011 Civil cassation number 222/2010, and 226/2010 passed a decision as per Article 1317 and 1318 of the Civil Code that:

    "Whenever a property subject to possession is under registration with Land Department registry by a person different than the possessor, the fact will not allow him to hold possession rights even if the person submits all the relevant documents. Mere registering the property does not offer a right of possession regardless of the duration of such ownership whether in long term or short term."

    It is clear from the above judgment that even if the acquisitive limitation period is 15 fifteen years in federal law, there are exceptions from such regulation and such period could be extended or reduced. Similarly, the limitation of three years in cases of annulment of the contract due to lack of eligibility or defect will restrict the party to file a lawsuit after three years, even though it is for compensation for unlawful activity. The civil law has made such golden rule but provided exceptions, and there are rights which limitation are five years such as rent of buildings, agricultural land, and rent, benefits, and income, wages, and Pensions. In addition to this, the limitation for the rights of doctors, pharmacists, lawyers, engineers, experts, bankruptcy agents, brokers and professors, teachers, is for five years provided that such reasons are due to them for their work and the expenses they incurred. The limitation for traders and manufacturers are two years for goods they supplied to people, also the rights of hotel owners and restaurants for accommodation and food on behalf of their customers, as well as the rights of workers and servants. Importantly, the claim for an award shall not be heard after three months from the date of violation by the award giver. Also, the limitation for cases of guarantee the defect is six months from the time of receiving the product unless the same is guaranteed for more duration however the seller cannot use this limitation if the party proves in the court that the defaulter hid the defects on purpose.

    Whereas, under Federal Law, Number 8 of 1980 on UAE Labour Law (Labour Law) states that the court will not entertain a matter post a year from the date of labor rights becomes due. It is evident from the Court of Cassation ruled in its judgment which highlights as follows:

    "According to the Article 6 of Labour Law, the party has to file the case within one year from the date the labor rights becomes due, and any process that is taken by labor ministry will not consider while calculating the limitation period."

    The rule for calculating the acquisitive limitation period is to figure per day, not an hour, and the first day shall be included in the calculation and shall be deemed complete on the last day. However, one can stop calculating, when the case is in the court and even if the court does not have jurisdiction. Also, one can prevent the calculation if the debtor acknowledges the right of the creditor.

    The Abu Dhabi Court of Cassation in Case 701 of 2014 decided on 30 October 2014 reversing the Court of Appeal Decision in a matter involving forgery held:

    "Under Article (487) of Law on Civil Transactions (1- A submission of limitation may not be waived before having established right to the same. Parties (to a claim) may not agree to a limitation period that is different from the statutory period – 2- A person with the capacity to dispose of their right may waive, even implicitly, a submission after having established right to the same. However, such a waiver is not effective against creditors where the same was with the intent to inflict harm on them). Article 488 of said law provides that (1- A judge may not rule, out of his own accord, that a claim may not be heard. Only a creditor or a party with interest may invoke the same. 2 – The submission may be made at any stage of the claim, unless the circumstances establish that the party with a right to submit has waived the same, explicitly or implicitly). The two articles mean that a creditor may waive the right to invoke the expiry of the limitation period after having established their right to the same. The article refers to waiving the right to invoke the expiry of the limitation period. Such waiver can be explicit or implicit. However, once waived, it becomes conclusive and may not be revoked. A submission that the claim may not be heard relies on non-satisfaction of the requirements to hear the same. The objective of such submission indicates that it has to do with merits. Accordingly, it may not be invoked for the first time before the Court of Cassation. As the Cassation Appellant did not invoke this submission before the trial court, with its two tiers, he is deemed to have waived it."

    In Criminal Law:

    Acquisitive limitation period in the Federal Law Number 3 of 1987 on UAE penal code (the Penal Code) is either subject to the criminal case or the punishment.

    Status of limitation for Criminal case:

    As per Article 20 of the UAE penal code, the party cannot file a criminal case under the following circumstances:

    • In the event of death;
    • Upon obtaining a final judgment;
    • If the court rejects the case;
    • If the court grants a relieve;
    • If the court cancel the punishment;

    Also, the limitation for criminal cases is twenty years for matters subject to a death sentence or a life sentence. As for other criminal cases, the restriction is for ten years,and misdemeanor is three years, and one year for violations. That is all from the date of committing the crime.  

    Status of limitation for Punishment:

    According to Article 315 of the Criminal Procedure Law or the Penal Code states that "Except for the crimes of Hudood, Qasa, Diyyat, and crimes in which court awards death or life imprisonment, the penalty in other acts will expire after thirty years."

    Whereas in cases of a misdemeanor the penalty will expire after seven years and after two years for violations. Unless the court passes judgment in the absence of the defaulter as then, the duration will start from the date of the decision. However, upon the detention of the criminal, the term will pause or if the criminal commits a crime of the same category and he receives a judgment.

    Below we discuss a judgment passed by the Abu Dhabi Court of Cassation (521 of 2014) (Civil), and decided on 25 September 2014.

    The matter relates to an accident which took place on 22 December 2009 and the Appellant (the injured) filed a criminal claim on the same day. A judgment on above criminal matter was decided on 30 December 2009 and Appellant did not register any appeal. Legally, the criminal decision would become final and effective on 14 January 2010, and the Appellant would have three (3) years time from the above date to file a civil claim.

    The Appellant, however, filed the civil action on 21 January 2013 and upon filling the same was presented before a committee and finally registered as a claim on 27 January 2013 against the insurance company (the Respondent). The Respondent argued that the claim was barred by the statute of limitation in line with Article 298 of the UAE Civil Code.

    Upon hearing both sides, the Court of First Instance in this matter rejected the Defendant's claim on the premise that Article 298 is acceptable if and only if there is no criminal claim (Note: for criminal claims, the limitation extends to fifteen (15) years).

    The Court of Cassation held that First Instance Court had misapplied the law. It held that the criminal claim in the present matter was decided upon and closed. Had it continued, the claim would be valid for fifteen years. The court also held that the First Instance Court had wrongly applied the limitation to commence or run from the date of medical report (16 June 2013). The Court decided that limitation will apply from the date of the accident or the date criminal claim was finally decided.

    ]]>
    Tue, 17 Apr 2018 00:00:00 GMT
    <![CDATA[ADGM Civil Court Proceedings]]> ADGM Civil Court Proceedings

    Abu Dhabi Global Markets (ADGM) located in the capital of UAE in the city center of Abu Dhabi is an international financial center for local, regional and international organizations. ADGM is a channel that connects UAE with the world with its essential hub for global commerce. ADGM has three independent authorities; ADGM Courts, Registration Authority, and the Financial Services Regulatory Authority (FSRA) that ensure that businesses run within the framework of international practices that are recognized by major financial centers across the world.

    The ADGM, or Abu Dhabi Global Market, is a relatively new free zone, having been established in 2013, and is located on Al Maryah Island. This particular free zone was set up as an international financial centerand is fast becoming a vital element of the city's long-term plans, interacting and connecting with International Financial Centers around the globe. ADGM has given life through Federal Decree Number 15 of 2013, under which Article 1 states the establishment of a financial free zone in Abu Dhabi. Following three authorities are responsible for managing the openregion and all the companies within:

             i.            The Financial Service Regulatory Authority (FSRA)

           ii.            The Registration Authority

          iii.            And the ADGM Courts

    ADGM Law

    Having three independent authorities within the free zone allows for each to concentrate on the legislation under their area of expertise. The law here comes in three levels. At the highest level is the Federal Legislation of the UAE. These are laws from the federal level that act within the free zone and govern some aspects of the activities therein. These include:

            i.            The UAE Constitution

           ii.            Federal Law Number 8 of 2004, which allows for the setting up of a financial free zone anywhere within the country, and unbinds them from all commercial and civil laws, though it does not exempt them from the countries criminal law

          iii.            Decree Number 15 of 2013/Cabinet Resolution Number 4 of 2013, both of which are responsible for the establishment of the ADGM

         iv.            Cabinet Resolution Number 28 of 2007, which implemented regulations of Federal Law Number 8 of 2004 concerning financial free zones

    After the Federal Laws of the UAE, there is the Abu Dhabi Legislation, which is:

             i.            Law Number 4 of 2013, which sets out the governance, legislative and regulatory framework and activities to be carried out in ADGM

    Beyond these, the rest of the laws under the decision of internal authorities of the ADGM, and include:

    i.                     ADGM Courts Regulations and Rules, enacted on 11 December 2015

    ii.                   ADGM Courts Procedurespromulgated on 30 May 2016

    iii.                  Arbitration Regulations, passed on 17 December 2015

    iv.                 Commercial Regulations, adopted 3 March 2015

    v.                   FSRA Regulations and Rules

    Civil Proceedings within the ADGM

    To begin with, the ADGM has two courts. These are the courts of the first instance, and the court of appeal. There are many elements of similarity with this system and the one used in the UK as will be seen through the civil procedure rules. Some of these similarities include the way the claimant initiates the case, the way in which the defense accepts or denies allegations, and the concept of case management. These are not all of the similarities,and while the elements will not be the same, there are apparent similarities

    The ADGM court procedure rules, which were implemented in May of 2016 and amended in December of 2017, govern the issue of Civil Proceeding within the free zone, and also the matter of evidence and how the court handles. Their regulations are highly in depth, and the entire system within the ADGM adequately organized.

    Part 5 of the rules states that the proceeding begins on the date entered on the claim form, which is to the defense on the request of the claimant. The claimant files the application in the court, who then proceed to question the claim form. The claim form must contain within it what the claimant seeks and should include any particulars and practice directions of the case.

    Part 6 of the rules concern the response of the defense party. The party must come forward with defense within 28 days of the service of the initial claim.  Ifthe defendant fails to reach the deadline, the claimant party may move for a default judgment, which is touched on under Section 39 of the rules. Section 49 relates to the content of the defense response. Within this should be included what elements of the claim the defense chooses to admit, deny and which they cannot accept to or deny but would require the claimant to prove. If the argument fails to do the above mentioned for an activity, they shall be considered to be admitting to it.

    Section 50allows for the defense party to make counterclaims in regards to the case, though they must first mention this to the courts. This counterclaim needn't be directed at the claimant party, though it must be related to the overall issue at hand.

    The parties and individuals present in the litigation are under the rules of Part 7 of the manual. It is also feasible for the courts to provide Summary Judgements on cases brought before them if they feel:

    ·         The claimant has no real chances of success

    ·         The defense doesn't have a prospect of defending the claim

    ·         Or if they think there is no reason for the case to be disposed of at trial

    While the situation is going through the court system, there is an element of case management, which is underPart 12 of the civil procedure rules. Case management is when the court itself takes part in managing some aspects of the case, usually to ensure the trial runs smoothly and the appropriate directions are intoconsideration. The idea behind this is that the situation becomes more transparent in this way, and there is less wastage of the courts time and money.

    One of how the courts may manage a case is underSection 1 of part 12, which states that is a court decision to do so, they may issue a directions questionnaire to the parties on a specific area of the case. Placing time deadlines upon them to have to have those completed, and Section 4 states that should a party choose not to follow these instructions, the court may take what steps it deems necessary to deal with the issue.

    On top of this, the court sends out a pre-trial checklist to the parties and a date by which the parties should complete the list. It will allow the court to obtain the information they deem necessary before a trial, thus allowing them to make appropriate preparations and be up to date. With this information in hand, the court can accurately decide deadlines for the litigation.

    The Law of Evidence in the ADGM

    The law relating to evidence is the same as the court procedure law and is in Part 14 of the rules. According to the law, the courts have a reasonable degree of control over evidence. They will likely see all of the evidence of the trial before its start, and this is becausethe parties may request it as part of the pre-trial checklist. It provides the court with a great deal of control over the trial, as they can then choose when specific evidence is required, and they can also decide to exclude evidence from being presented, even if that evidence would have otherwise been admissible.

    About witnesses, the rules set out the basic principles. Once again, the court can decide which witnesses can stand to provide testimony. So long as the court approves a witness, they can be brought forward to prove any fact that requires evidence via oral testimony as mentioned under Section 93 of the Court Procedure Rules. On top of this, as per Section 93 Subsection 4, witness testimony may be given through video chats or other such similar services.

    Parties can use affidavits separately or alongside witness testimony. They are under Section 104of the rules, and in Section 105, it is clear that the only authorized bodies that may take affidavits are:

    ·         A notary public bySection 221of the regulations

    ·         A Judge of the court

    ·         The Registrar

    ·         A lawyer

    ·         A court officer appointed to perform the duty by a registrar

    The use of photographic evidence, models or plans is not allowed in the courts unless the court has been made aware of these, and has approved of them. This type of evidence under Section 116 of the manual, and Subsection 4 furthers this by mentioning that all parties must be allowed to view and inspect the evidence before it can be admissible in the case

    Another point of importance underSection 117 of the rules and concerns foreign law. The treatment is similar to that of photographic evidence, in that it must be approved of before it can move forward.

    Another matter which receives emphasis throughout Part 14 of the rules is that much of the evidence must get shared with the courts and other parties, and the practice directions must be made clear.

    The regulations are far more expansive than what we discuss presently. It is just the tip of the civil procedure and law of evidence iceberg. The system is highly regulated, with many notable similarities to the UK civil court procedure system, and the ADGM, in general, has big plans for its future, for which a good, well-developed system would be ideal

    ]]>
    Fri, 30 Mar 2018 00:00:00 GMT
    <![CDATA[Глобальный Анализ Соглашений Франчайзинга]]> ГЛОБАЛЬНЫЙ АНАЛИЗ СОГЛАШЕНИЙ ФРАНЧАЙЗИНГА

    «Изоляция невозможна. Глобализация неизбежна и полезна».

    Введение

    Вы хотите создать привлекательную бизнес-модель для распространения товаров и услуг по всему миру? У вашей компании есть имидж бренда на рынке и вы хотите расширения? У вас есть уникальнй тренд, и вы хотите получить от него прибыль? Если вы положительно ответили хотя бы на один вопрос, то франчайзинг– это лучший вариант для того, чтобы заработать всемирную популярность с минимумом ресурсов и максимум прибыли. С развивающейся мировой экономикой и изменениями в международных корпоративных транзакциях, предприниматели во всем мире стремятся открыть свои бренды в зарубежных странах. Если вы один из этих предпринимателей, это статья будет для вас  нечто большим, чем юридический аспект соглашений о франчайзинге.

    Бизнес-структура крупных компаний быстро трансформируется с четкой целью расширения по всему миру. Франшиза – это уникальный метод и механизм передачи бизнес-структуры с помощью нескольких ресурсов, используемый прежде всего в сфере услуг. Это прежде всего проявление взаимодействия между приверженностью получателя франшизы и управленческого опыта франчайзера. Для существования модели франшизы в стране нужна правовая среда, обеспечивающая организованные рамки для всех заинтересованных сторон, однако в различных странах нет единогласия относительно единственной модели. Оглянувшись назад в историю, мы можем видеть заметную тенденцию регулирования в основных юрисдикциях после адаптации модели франшизы, большинство стран готовы изменить правовую среду для того, чтобы система франшизы дышала. В то время как некоторые другие страны по-прежнему неохотно к ней относятся и полагаются только на основные правила и положения, регулирующие другие виды предпринимательской деятельности в целом.

    Модель франчайзинга в дальнейшем выиграла от тенденции к глобализации рынков, новая глобальная адаптация модели франчайзинга рассматривается как икона западной глобализации. Принимая во внимание международные стандарты, в этой статье основное внимание уделяется элементам франчайзинга, правовой структуре и ее применению в основных юрисдикциях в мире.

    ОАЭ

    ОАЭ обладают устойчивыми и динамичными рынками и предлагают новые международные бизнес условия, благоприятные для франшизы. В настоящее время в ОАЭ франшизы работают в различных секторах, но в основном в сфере быстрого питания, безалкогольных напитков, косметических продуктов и одежде. Франчайзинг в ОАЭ регулируется рядом гражданских и коммерческих законов в зависимости от условий контракта, поскольку в стране нет конкретного закона о франчайзинге. Существуют многообразные законы, которые применяются к соглашениям о франчайзинге, такие как Федеральный закон № 13 от 1981 года (с изменениями) об организации коммерческих агентств, Федеральный закон № 5 от 1985 года о гражданских сделках, Федеральный закон № 18 от 1993 года о коммерческих сделках.

    Помимо вышеупомянутых к ним также относится закон об интеллектуальной собственности ОАЭ в отношении товарных знаков, авторских прав и патентов, Федеральный закон № 8 1980 года о трудовом законодательстве (с поправками). Однако главной проблемой, с которой сталкиваются суды ОАЭ при рассмотрении франшизы в качестве агентства, является арбитраж в споре о франшизе. В стране существуют два типа соглашений о франчайзинге, зарегистрированные и незарегистрированные, где одни зарегистрированы в Министерстве Экономики ОАЭ, а другие – нет. Спор, возникающий при зарегистрированном соглашении о франчайзинге, обеспечивает исключительную юрисдикцию местным судам в соответствии с Законом о коммерческих агентствах, напротив, спор, возникающий при незарегистрированной договоренности, не рассматривается в суде. Закон о Коммерческих Агентствах благоприятно настроен по отношению к получателям франшизы нежели франчайзерам, и поэтому международные бренды до открытия в ОАЭ должны учитывать необходимость регистрации соглашения. Регистрация может обеспечить возможность обеим сторонам предотвратить параллельную торговлю товарами и имеет доказательную ценность  в вопросе о нарушении товарного знака. Суд сталкивается с несколькими видами споров как связанных с зарегистрированными,  так и незарегистрированными контрактами, когда прекращение действия зарегистрированного агентского соглашения затруднено, или имеет место быть искажение, нарушение договора, назначение другого агента после прекращения действия контракта.

    На практике существует значительная часть незарегистрированных соглашений, и суды во многих случаях рассматривают дела, в которых применяются существенные положения Федерального закона № 18 1993 года о коммерческих сделках. В зарегистрированных соглашениях, закон предусматривает более высокую защиту франчайзи, ссылаясь на статью 8 Закона о коммерческом агентстве, где Принципал может расторгнуть договор только по обоснованной причине, тогда как по незарегистрированным соглашениям соглашение рассматривается как договор.

    Объединенное Королевство

    В 1960 году Dyno-rod стала первой франчайзинговой сетью, запущенной в Великобритании, с тех пор франчайзинг заложил свои корни и процветал как проверенный метод расширения бизнеса на рынке. Британская ассоциация франчайзинга (BFA) регулирует систему франчайзинга в стране в соответствии с ее кодексами и этикой из-за отсутствия конкретных законов о франшизе. Кодекс BFA относится только к ее членам, но Верховный Суд Великобритании изменил свое мнение в деле Re Drivetime Recruitment Ltd Re DST Ltd, где речь шла о франшизе, в которой франчайзер не был членом BFA,суд признал важность BFA при анализе поведения франчайзеров в целом. Кодекс BFA налагает обязательства на обе стороны и специально не поддерживает какую-либо из них.

    Помимо кодекса BFA, Закон Великобритании о конкуренции 1968 года регулирует все виды соглашений в стране, включая франчайзинговые соглашения. Однако главной проблемой среди франчайзеров является запрет на заключение соглашений, установленный самим Законом о конкуренции. В первую очередь, франчайзеру запрещается заключать соглашения, нарушающие или искажающие Закон о Конкуренции, во-вторых, любое соглашение, не соответствующее Законодательству Европейского Союза, также не соответствует законодательству Великобритании. Правила ЕС применяются в Великобритании в соответствии со статьей 101 Закона, когда Европейская Комиссия выпустила освобождение от обязательств для вертикальных соглашений, которое включает освобождение от определенных правил и положений при соблюдении определенных критериев..

    Хотя в стране нет конкретного закона о франчайзинге, существует другое законодательство, которое использует суд при решении спора между франчайзерами, а именно Закон о Коммерческих Схемах 1996 года, Закон о Защите Данных от 1998 года, Закон о Несправедливых Контрактах 1977 года и Закон о Взяточничестве 2010 года. Суд рассматривает несколько разновидностей споров между сторонами, которые включают исполнение принудительных неконкурентных обязательств после прекращения действия контракта, нарушение контракта, введение в заблуждение и многое другое.

    Соединенные Штаты Америки

    Лидер в мировой индустрии франчайзинга и образец для подражания большинства франшизных систем мира по-прежнему занимает ведущую позицию на мировом рынке. Франчайзинг в США регулируется федеральными или государственными законами, где первое это Федеральное Правило Франчайзинга, принятое Федеральной Торговой Комиссией США (FTC), применяемое по всей стране, а второе – законы различных штатов, которые применяются к конкретным транзакциям, если продажа франшизы произошла в конкретном штате, бизнес находится в штате или получатель франшизы находится в штате.

    Помимо основного закона, существует 3 общие категории законов, регулирующих франшизу в стране, а именно законы о раскрытии информации, законы о регистрации и другие соответствующие законы. Эти три категории предотвращают наиболее распространенные виды нарушений во франчайзинговых соглашениях, такие как продажа незарегистрированной франшизы, неверно предоставленная информация и неправомерное расторжение контракта. Федеральное Правило Франчайзинга не предусматривает конкретного положения о регистрации франшизы, однако различные штаты требуют, чтобы франшиза была зарегистрирована до выхода на рынок. Кроме того, законы штатов также налагают другие ограничения на франчайзинговые отношения, в том числе добросовестность и разумность, маркетинговые сборы, отказ от обязательств и т.д.

    Дело eBay Inc. против MercExchange LLC является одним из важных случаев в истории франчайзинга США. Оно затрагивало вопрос о защите прав на товарные знаки после окончания срока действия контракта, суд высказался в пользу права франчайзера на прекращение использования товарного знака после завершения соглашения.

    Индия

    Франчайзинговый сектор в Индии находится в стадии развития, и аналогично большинству стран мира в нем нет конкретных правил, регулирующих закон о франчайзинге в стране, и поэтому соглашения являются договорными по своему характеру. Франшизные соглашения  регулируются различными статутами и законами, которые определяют тип отношений между франчайзерами, Закон о Договорах в Индии 1872 года, Закон о монополиях и ограничительной торговой практике 1969 года, Закон о Конкуренции 2000 года, Закон о передаче имущества 1882 года, Закон о Защите прав потребителей 1986 года, Законы об интеллектуальной собственности, Индийское налогообложение 1961 года и Закон об управлении иностранной валютой 1999 года. Кроме того, перед выходом на индийский рынок любые инвестиции должны соответствовать правилам политики прямых иностранных инвестиций (FDI), раз в полгода выпускаемым Департаментом Промышленной Политики и Продвижения (DIPP).

    Франчайзеры и франчайзи создают договорные отношения, однако иногда отношения между сторонами могут считаться агентскими, если франчайзи разрешено заключать контракты с третьей стороной. Кроме того, вопросы, касающиеся соглашений о франчайзинге, могут включать расторжение договора, искажение информации, нарушение договора и многое другое. Тем не менее, суд не рассматривает вопросы об ограничивающих обязательствах после завершения срока действия контракта, в соответствии в разделом 27 Закона о Договорах подобные ограничивающие оговорки являются недействительными. Кроме того, суд не поддерживает ни одну из сторон, поскольку отношения между франчайзером и франчйзи в целом являются договорными, однако в отношении принципал-агент закон больше благоприятен для агента. 

    Суд Высшей Инстанции всегда старается максимально эффективно решать споры. В деле Gujarat Bottling Co. Ltd. против Coca-Cola Co. Ltd.[ii]Верховный Суд Индии акцентировал внимание на важном аспекте соглашения о франшизе, разглашении ноу-хау и коммерческой тайны получателю франшизы. Суд счел, что получатель должен предпринимать адекватные шаги для защиты конфиденциальности франчайзера, а тот, в свою очередь, имеет право навязывать ограничивающие обязательства для предотвращения раскрытия коммерческой тайны на рынке.

    Саудовская Аравия

    Королевство Саудовская Аравия открыто для  соглашений о франшизе с небольшими правовыми ограничениями. Законодательство Саудовской Аравии не создает различия между иностранными франчайзером  и франчайзи и саудовскими. В стране нет конкретного закона о франшизе, однако Министерский Указ  №1012 от 17 сентября 1412 года (соответствует 22 марта 1992 года), изданный  Министерством Торговли и Промышленности, привел франчайзинг в соответствии с аналогичной сферой регулирования коммерческих агентств. Регулирования коммерческих агентств устанавливают правила, регулирующие отношения между принципалом (франчайзером) и агентом (получателем франшизы). Кроме того, как и в ОАЭ существует 2 типа соглашений, зарегистрированные и незарегистрированные, где первые зарегистрированы в Реестре Коммерческих Агентств в Министерстве Торговли и Промышленности в течение 6 месяцев, а другие - нет. Кроме того, лица, не зарегистрировавшие свои соглашения, могут по-прежнему осуществлять свою деятельность, но они не смогут пользоваться защитой в соответствии с Законом об Агентствах.

    Принимая во внимание обязательные положения, законы шариата будут применяться ко всем соглашениям о франшизе, и стороны имеют автономию для структурирования контракта. Закон рассматривает такие вопросы, как прекращение действия, когда договор будет расторгнут в соответствии с положениями и нет минимального срока для его исполнения. Ограничительные положения законно подлежат исполнению в Королевстве, где франчайзер имеет право ограничивать франчайзи от конкуренции с франчайзером, разрешение споров, стороны могут предусмотреть механизм разрешения споров, и если стороны не выбрали арбитраж, вопрос будет разрешен судом, имеющим юрисдикцию.

    Заключение

    С волной глобализации, захватившей бизнес-структуру крупных компаний по всему миру, франчайзинг кажется привлекательным и выгодным вариантом для иностранных брендов, которые расширяются во всем мире. Будущее франчайзинга яркое и ясное; однако рекомендуется проконсультироваться с адвокатом до заключения соглашений о франшизе из-за различий в законах в различных юрисдикциях.


    [i] [2004] ALL ER (D) 180 (Jul)

    [ii](1995) 5 SCC 545

     

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    Thu, 22 Mar 2018 12:50:00 GMT
    <![CDATA[Понимание избежания налогов против уклонения от уплаты налогов]]> The Fine (and Hazy) Line between Tax Avoidance and Tax Evasion

    'The difference between tax avoidance and tax evasion is the thickness of a prison wall.'

                                                                           -       Denis Healey

    Keeping in mind the contradiction between the heading of this article and the quotation above, I wish to draw your attention to an illustration. In the 2001 movie 'Blow,' George Jung had argued in open court that the reason for his arrest was merelycarrying few plants over an imaginary line when the judge asked him about trafficking marijuana from Mexico to the United States. Now, the few plants he was referring to were marijuana plants and the imaginary line was the US - Mexico border. The man was carrying a few plants over an imaginary line. But according to the law, the plants he was carrying were Schedule I substances under the Controlled Substances Act, 1970. So, the unpleased judge sentenced Mr. Jung to two years of imprisonment for carrying illegal plants over substantially visible political boundaries. The purpose of this introduction was to enlighten the reader about how little the illusion of what is legal and illegal could be in today's world. And as the title suggests, our topic of discussion today is to analyze this difference between legality (tax avoidance) and illegality (tax evasion) in regards to unpaid taxes.

    Leaving all the technicalities out, the primary difference between tax evasion and tax avoidance is legality. Although, these terms came into existence to provide the taxpayers, governments, and courts with ease of defining the concept; that has not been the result. The Government and regulatory authorities prosecute any person or corporation that tries to reduce their tax liability by considering the latter's actions as tax evasion. Whereas, the latter contends that they have acted within the purview of the law and were merely trying to minimize their liability. It's for the courts to decide now. The taxpayer(s) will be acquitted if the courts decide the case by stating that he has merely avoided the tax and they will be convicted if the courts decide that the taxpayer was trying to evade the provisions of the tax law.

    Drawing the Line

    Tax avoidance is legally minimizing tax liability, including deductions (prescribed by the legislation), tax credits, tax deferral plans (like 401(k) plans) and so on. Concerning our above illustration of George Jung, tax avoidance is basically like carrying a few plants across an imaginary line – no illegality involved (as long as the facilities are plants and the imaginary line is not a political border). Whereas, tax evasion, on the other hand, is not a simple journey. Tax evasion is illegal as it is the failure of a taxpayer to pay actual taxes that they owe to the authorities by deceit, or by concealing the exact tax amount. Tax attorneys and accountants often try to reduce the tax liability of their clients by engaging numerous methods. But how will you know whether they are crossing this line and are moving over to do something illegal? Let's read more to find out.

    Tax Evasion

    Mens Rea (also known as ill-intention or fraudulent intention) is one of the primary factors considered when trying to determine the difference between tax evasion and tax avoidance. Tax evasion is an illegal act by which a taxpayer tries to portray to the authorities that he or she is liable to pay lesser tax (than their actual liability – if they would disclose their income in good faith). The illegality in tax evasions comes into existence only when the taxpayer fails to disclose the actual amount of the revenue that they have gained in a particular transaction. To begin with, we should first understand why tax evasion is considered illegal.

    Let us analyze this case to understand further: taxpayers in the US are liable to pay tax on their illegal income also. In the infamous case of James v. the United States, a reference made t the court on a question that whether taxpayers were responsible for payingtax on their illegal income. The appellant was one of the officials in a labor union and had embezzled approximately USD 750,000 from the union's funds – but believe it or not, that was not the crux and issue of the case. Mr. James was held and tried for his failure to disclose this amount to the Internal Revenue Service (IRS) – or in short, tax evasion. It was a landmark case on tax evasions in the US at the time. The appellant contended that the funds were an illegal source of income and therefore did not fall under the ambit of 'taxable income.' Therefore, the US Supreme Court had to determine whether the IRS could tax illegal sources of income. After studying the facts and analyzing the provisions, the Supreme Court held that the appellant had an obligation to disclose this illegal income under gross income.Subsequently to pay tax for it as per Section 22 (a) of the Internal Revenue Code of 1939 and Section 61 (1) of the Internal Revenue Code of 1954.It meant that the appellant was required to return the embezzled money to the rightful owners and also pay tax for it. 26 US Code § 7201 defines tax evasion and states that 'Any person who knowingly attempts in any manner to avoid or elude any tax imposed by this title or the payment thereof, shall, regardless of other penalties under the law, be guilty of a felony. Further, a fine of not more than US Dollars 100,000 (US Dollars 500,000 in the case of fraud), or imprisoned not more than five years, or both, together with the costs of prosecution'.

    The existence of fraudulent actions gives rise to the concept of tax evasion. Although tax evasion, as a whole, is considered a serious crime, there are different types of tax evasions. The negligence or omission in submitting the returns of income are considered less offensive than false or fake declarations. The latter may fall under tax fraud since it constitutes an explicit act with an ill-intent by the taxpayer to reduce or minimize his tax payables.

    Tax Avoidance

    In a legally discreet way, on the contrary, one can mitigate the burden of tax by exploiting the loopholes in the taxation regime, where spending the resources on 'constructive' activities rather than 'rent seeking' activities. Tax avoidance can be determined by the complexities in the taxation regime of the country as complexities tend to leave a vacuum for bickering about the intention of the lawmaker and for innovative attempts to find arrangements within the text of law if it is not in its spirit. Hence, unsurprisingly tax avoidance attracts considerable attention in gray areas such as taxation of multi-national companies, where the country's taxation system meets the foreign regime and complexity is imminent.

    Avoidance behavior is typically an indication of the substitution effect and of ability to utilize the tax code to your advantage. Early, in 2007 Bradley Birkenfeld, a UBS banker, informed United states about the usage of UBS accounts as tax shelters. This activity allowed many US citizens to camouflage their income from the IRS, which can typically be construed as an avoidance scheme but was later categorized as an aid to hide taxable assets by opening offshore accounts. After one year, Switzerland bank accounts accuse UBS of tax evasion. Post the infamous UBS incident IRS in late 2009, initiated a program namely, Voluntary Disclosure Program as an incentive for those who will disclose their foreign accounts for evading taxes. Currently, in the US, tax avoidance is a legal practice, but the restriction applies to tax evasion.

    The Disclosure of Tax Avoidance Scheme (DOTAS) in the UK is a recent development as far as tax avoidance is concerned. The legislative framework introduced by the HM Revenue and Customs (HMRC) which updates the customs department about new tax avoidance schemes currently in circulation. DOTAS rules are lengthy and complicated, and as soon as it is presumed that a person can obtain a tax advantage, thedisclosure regarding details of the arrangementreferred to HMRC. The HMRC's stringent tax avoidance rulesdesignedin such a way that not only the taxpayer but the accountants, consultants, and lawyers fall under the same purview as of the taxpayer. The prevalence of tax avoidance schemes and rules in almost all major countries has been successful in convincing governments that it is a difficult battle against tax evasion and tax avoidance.

    UAE battle against tax evasion

    The OECD (Overseas Economic Cooperation and Development), recently implemented Common Reporting Standard (CRS), a new reporting system to trace and monitor tax evading nationals overseas. CRS corresponds to FATCA (Foreign Account Tax Compliance Act) in the United States. CRS is a programme launched by OECD to which UAE, India, Canada, Turkey, Indonesia and other countries are signatories. Even though the UAE is relatively new to the taxation arena, the nation has already joined the battleground against the tax evaders to curb tax evasion.  The convention signed under OECD provides all possible assistance in tax-related matters such as tax examinations, tax collection, automatic exchange, and tax examinations abroad. CRS is a step ahead to defeat the tax evaders as the system enables the authority to keep a record of information exchanged between the countries regarding individuals and expat bank accounts, including all the details of interest and income earned outside the territory.

    The UAE government has not implemented technical provisions that distinguish between tax evasion and tax avoidance since the country was considered a tax haven for the many previous years. However, the implementation of value added tax in the state is expected to bring thorns in the corporate garden of the UAE. But only time can tell about the differences that VAT may bring about in the taxation regime in the country.

    Conclusion

    The amount of federal revenue at stake due to tax evasion every year is prominent enough to raise public concern. Government schemes for disclosing tax evasions is appreciable, whereas, it is far more critical for the country's integrity that the taxpayer contribute their 'fair share' in tax revenue instead of making arrangements for evading taxes.

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    Mon, 19 Feb 2018 01:59:00 GMT
    <![CDATA[Contracts Law - Extension of Time]]> Preventive Principle and Extension of Time

    Time and again we have discussed the level of dynamicity in the sectors and industries such as construction, maritime, cryptocurrency and the like. Today, we are going to analyze why these areas in specific are comparatively more dynamic than others – mainly because projects and transactions in these sectors include numerous parties who operate on different stages. It is a mechanism for various individuals who perform their contractual obligations that are guided by internationally accepted norms. For instance, in the construction industry, engineering contracts usually are governed by the contract templates released by the Fédération Internationale Des Ingénieurs-Conseils (FIDIC), Engineering Advancement Association of Japan (or popularly known as the ENAA) among others. These templates or default contracts are in place to minimize the dynamicity that we had earlier discussed; however, they are not always viable because – every project is different from each other. No two plans or transactions are structured the same way since each project has its peculiarity in the number of parties involved, the financing structure in place, the estimated timeline for project completion and the like.

    Now, coming back to the topic I was initially assigned. In this article, we have elucidated the facts and issues of a landmark case that arose due to sector dynamicity between Adyard Abu Dhabi LLC (a company established in Abu Dhabi, United Arab Emirates) and SD Marine Services (a company incorporated in the United Kingdom). The case of Adyard Abu Dhabi (or Adyard or Claimant) v SD Marine Services (or SD or Defendant)[i] came before the High Court of Justice (Queen's Bench Division Commercial Court). Th court had to decide whether there a contractor can extend the time to complete to project when a delay that falls within the ambit of 'prevention principle' has taken place.

    Facts of the Case

    Adyard was an SME (small to medium size enterprise) that specialized in shipbuilding in Abu Dhabi, and SD provided commercial services in the maritime industry to the public sector in the United Kingdom. The Defendant had contracted with the Government of the United Kingdom to deliver sea-port services, navigational services and the like to the Royal Navy of the United Kingdom over a period of fifteen (15) years. SD appointed another company, SERCO, as the subcontractor and overlooked the project.

    The Defendant had engaged the Claimant to construct and assemble two (2) moorings and SOSVs (special operations support vessels) under a contract dated 14 December 2007 (the Contract). The Contract had stated that the Claimant had the liability to manufacture, assemble and ready the two (2) SOSVs by 30 September 2009 and 30 November 2009 for sea-trials. Article II of the Contract had also provided that the Defendant had the right to revoke the Contract in case the SOSVs were not ready for sea-trials by the dates agreed. Clause 3.3 of article II reads as follows:

    'If the Builder fails to complete either of the stages contained in Clause 3.1(c) or (e) by the dates specified therein, then the Buyer may, at its option, rescind this Contract. However, it should be by the provisions of Article X hereof, always provided that, to the extent that any delays were due to the Buyer's default or any Permissible Delay, that the increment in the period shall be to the same extent.'

    Clause 2.1 of article X of the Contract states that Adyard had the liability to refund all the amounts it had received from SD if they had not commenced the proceedings. However, the SOSVs were not ready for the decided dates, and SD subsequently exercised its right to rescind the Contract vide letters dated 7 October 2009 and 14 December 2009.[ii]

    Contentions

    Claimant's Contentions

    Adyard commenced proceedings by article X on 15 October 2009 and 14 December 2009[iii] claiming that the delay had occurred due to SD. They also contended in the circumstances that they were entitled to an extension and therefore, were not liable to refund the installments paid by SD. The primary contention of the Claimant was that SD and the Maritime Coastguard Agency had instructed them to make numerous changes in the designs of the vessels in June and July 2009. Adyard stated that the delay was not caused due to them as the variations arose from the changes in the safety standards of the Maritime Coastguard Agency.

    They also submitted that the 'preventive principle' would apply in their matter since their scope of work was amended to include the variations after the contract had commenced. It has also established in the Trollope & Colls Ltd v. North West Metropolitan Regional Hospital Board[iv] case that when the employer amends or increases the scope of work for the employee by asking the latter to do an additional job. In such cases, it would become impractical for the employee to complete the scope of work in the estimated or granted time. Therefore, the employer will not be liable for any liquidated damages due to the non-completion of the project on time. Adyard stated before the court that SD had asked them to undertake extra work (variations) and refused to negotiate on any adjustments or intention of time for completing the project.

    Defendant's Contentions

    SD, on the other hand, claimed that the design items ordered by them were not variations and also stated that there were no changes in the safety standards of the Maritime Coastguard Agency. They contended that the Maritime Coastguard Agency had merely reported that vessels would have to comply with the safety requirements of the SPS Code. They claimed that even if there were any variation in the scope of work (as Adyard had requested), it would not contribute to any additional delay. SD also emphasized on the Claimant's failure to furnish notice by Article VIII, clause two which mandated the latter to provide the cause of delay'.

    The Decision of the Court

    The court identified that there were contractual and factual issues in this case since the parties had raised their contentions on both grounds. The claimant successfully contended and established that there were variations in Article V, clause 2 of the Contract. However, Adyard's case ultimately depended on the applicability of the precautionary principle in this specific case. The learned court referred to the explanation of the preventive law in the judgment of Multiplex v Honeywell[v], in which Jackson J stated that one party could not insist the other side perform an obligation that the latter could not complete due to specific hindrances put forward by the former. In the construction sector, employers cannot hold the contractor liable if they could not meet the completion date due to variations (act or omission) of the employer. Instead, the contractor should be provided with reasonable time to complete the project considering the degree of difference. Extension of time clauses in construction contracts aims to protect and safeguard the rights and liabilities of both the parties. There are three (3) general propositions formulated by Jackson J that is still followed in the construction sector, being:

  • Legitimate actions by the employer could be termed as preventive if it causes delay beyond the date specified in the contract;
  • Preventive measures by the employer that does not set time at large (provided the agreement provides for EOT or extension of time clause for those specific issues);
  • When the parties have concluded that there is ambiguity regarding the expansion of time clause – such uncertainty should favor the contractor.
  • The court found that the Adyard failed to enforce the precautionary principle since they did not have any substantial claim for an extension of time. The court also observed that Article II, clause 3.3 and article VIII had laid down the circumstances when the contractor could claim for an extension of time to complete the project. However, Adyard failed to furnish notice by Article VIII, clause 2 to enforce these provisions. On the other hand, even if there were no requirements regarding the announcement, the actual reason for the delay should be analyzed to understand the extension of time. Once, they identify and analyze the right or cause of suspension; they must add the period of suspension to the initial contractual date. However, the Claimant continued to argue that the Defendant had not agreed to make any adjustments towards the completion date (date of sea-trials). Therefore, the court held that the Defendant had the right to rescind the Contract since Adyard failed to complete the work before the day of the sea-trials. The court also observed that this delay was not caused due to the Defendant and ruled the case in favor of SD.


    [i] Case Number 2009 Folio Number 1361 & 1622; [2011] EWHC 848 (Comm)

    [ii] 7 October, 2009 letter regarding the Hull 10 SOSV vessel; and 1 December, 2009 letter regarding the Hull 11 SOSV vessel.

    [iii] 15 October, 2009 proceedings regarding the Hull 10 SOSV vessel; and 14 December, 2009 proceedings regarding the Hull 11 SOSV vessel.

    [iv] [1973] 1 WLR 601, HL

    [v] [2007] Bus LR Digest D109

     

      ]]>
    Sun, 18 Feb 2018 00:00:00 GMT
    <![CDATA[Q&A: Pharmaceutical Laws and Regulations in UAE]]> Pharmaceutical Industry in the UAE

    1.     What are the primary laws and regulations governing pharmaceutical companies in the United Arab Emirates?

  • The primary piece of legislation governing pharmaceutical companies in the United Arab Emirates is Federal Law Number 4 of 1983 concerning the Pharmaceutical Profession and Pharmaceutical Institutions (the Pharmaceutical Law). This law applies to pharmacists, pharmaceutical establishments, and governs the import, manufacture, and distribution of pharmaceutical products. Articles 63 to 67 of the Pharmaceutical Law deals with the registration of pharmaceuticals. Article 47 of the Pharmaceutical Law states that a company must obtain a license to open a pharmaceutical company and Article 48, 55 and 56 lists the conditions that the entity should meet to get the permit. These include, among others, the requirement that the company is composed of different sections (production section, chemical section, disinfection section, and bacteriological laboratories) and that licensed pharmacists should supervise the factory. Article 49 mandates that the application for a license to open a pharmaceutical company should accompany the factory's contract of establishment/ articles of association and also the permit issued to the manager and the pharmacists, among other documents.
  • Federal Law Number 14 of 1995 regarding counter-measures against narcotic drugs and psychotropic substances regulate the import of (pharmaceutical products and) medicines into the United Arab Emirates.
  • Federal Law Number 5 of 1984 governs the licensing and registration requirements of physicians, pharmacists, and other professionals within the country's pharmaceutical industry.
  • Federal Laws Number 7 of 1975 and Number 2 of 1996 has laid down specific requirements for the establishment and licensing of public and private medical laboratories, clinic and hospitals in the country.
  • Federal Law Number 1 of 1979 on the Organization of Industry Affairs affect pharmaceutical companies located in the mainland as a local Emirati agent must be appointed, and their shares in the company's capital should not fall below a certain percentage.
  • Federal Law Number 2 of 2015 regarding Commercial Companies, provides further requirements applicable to companies on a general note, over matters such as licensing, the trade name, the Memorandum of Association (Articles 12 to 15).
  • The governmental regulators of each Emirate (such as the Dubai Health Authority or DHA and Health Authority - Abu Dhabi or HAAD) also issue regulations from time to time to regulate the pharmaceutical companies in their jurisdiction. The 'Dubai Community Pharmacy Licensure and Pharmaceutical Practices Guide' (February 2013) issued by the Health Regulation Department of the Dubai Health Authority focuses primarily on the licensing and protocol of institutions and professionals. This guide provides information on the administrative procedures required to set up a pharmaceutical company. It also offers instructions on purchasing, storing, dispensing, and prescribing medication and drugs. The Ministry of Health Code of Conduct also outlines the standards expected of professionals providing medical services.

    2.     Which governmental authorities regulate the licensing of pharmaceutical companies?

    The Ministry of Health and Prevention (MoH) is the primary body regulating the licensing of pharmaceutical companies in the United Arab Emirates. Article 65 of the Pharmaceutical Law specifies that imported pharmaceuticals should be registered with the MoH, regardless of whether or not they have been approved or registered in their country of origin. The MoH is also responsible for the regulation and implementation of health care policies in the country. Moreover, individual Emirates have also established their local health regulators to oversee the healthcare and pharmaceutical sector of their specific jurisdiction (Dubai Health Authority in Dubai, and the Health Authority - Abu Dhabi). These regulators monitor the licensing of pharmacists and pharmacies, the registration of pharmaceuticals and advertising guidelines for medications. The MoH formulates federal health policies and regulates the healthcare market in the Northern Emirates.

    3.     What is the registration process to set up a pharmaceutical company in the UAE?

    As mentioned earlier, under the Pharmaceutical Law, pharmaceutical products, and preparations must be registered with the MoH before being imported into the national market. The market authorization holder, along with its local representatives (such as licensed distributors) are mandated to submit a new drug application to the MoH before importing or manufacturing a pharmaceutical. The local agent is wholly liable for any complaints made by customers and non-compliance with the regulations set out by the Ministry.

    The Pharmaceutical Law prohibits anyone from preparing, composing, separating, manufacturing, packaging, selling or distributing any medicine without a valid license from the MoH (Article 1). This law also mandates that companies importing pharmaceutical products or medical devices must be locally established in the United Arab Emirates and have a pharmaceutical importation license. A sole natural person may also be importing these products if he is UAE national.

    4.     Are there any exceptions to the requirement that pharmaceutical products should undergo registration in the United Arab Emirates?

    The Pharmaceutical Law states that all pharmaceutical products imported into the United Arab Emirates must undergo registration with the Ministry of Health, with NO exceptions. However, the general practice has confirmed that the Ministry of Health has authorized the import of unregistered products in exceptional circumstances such as:

  • Emergency situation medicines
  • Drugs and medications required by government or semi-government health institutions
  • Registered and unregistered medication that is not available in the local market
  • Narcotic and psychotropic drugs (as per Federal Law Number 14 of 1995)
  • However, pharmaceuticals that are unregistered in the country of origin cannot be imported to the UAE even under the circumstances mentioned above.

    5.     How can a foreign manufacturers trade, distribute and advertise pharmaceutical products in the United Arab Emirates?

    Foreign manufacturers have two options to trade and distribution of pharmaceutical products in the United Arab Emirates. They can either establish a local presence (a company in the UAE) or appoint a local agent. Given that the MoH requires all pharmaceutical products be registered, a foreign manufacturer with no local presence will have to select a domestic partner to obtain the necessary approvals for trade, distribution, and advertisement of the product. This requirement allows foreign manufacturers to access the network and resources of the local agent, who may have nurtured their business relationships in the country over an extended period. The United Arab Emirates imposes restrictions on such foreign ownership and sponsoring arrangements.

    6.     Are local agents of pharmaceutical companies regulated? If so, how?

    The appointment of a local licensed agent by pharmaceutical companies is governed by Federal Law Number 18 of 1981 concerning organizing of trade agencies. Under this statute, the local agent will distribute the pharmaceutical companies' products in the United Arab Emirates vide an agency agreement registered with the Ministry of Economy. However, the local agent must comply with the following conditions:

  • the local agent should be a UAE national, or an entity fully owned by UAE nationals (i.e., hundred percent stake owned by UAE nationals);
  • the agent's appointment will be granted exclusively for one Emirate or several Emirates, and
  • the agreement must get notarized in Arabic, and the foreign manufacturer must provide a letter confirming they have no objection to the registration;
  • The local agent will have the right to trade, distribute and advertise the pharmaceutical products, exclusively and within the confines of the territory agreed on in the distribution agreement after meeting the above criterion. The agent's exclusivity to manage the registered products means that they can block third parties from dealing with them. Agents are also entitled to a commission on the sale of the registered products and will have the right to claim compensation upon the termination of the agreement.

    7.     Which license should a company obtain to open a medical store in the UAE?

    A person (legal or natural) that intends to set up a medical store or warehouse for medical products should obtain a medical store license to conduct their activities in the country. This requirement is not limited to companies that deal with pharmaceutical products but also applies to businesses that store medical equipment. To obtain this particular license, the company must employ at least two licensed pharmacists to regulate the medical store, and these pharmacists must be in charge of the regulation of medical devices and pharmaceutical products.

    8.     What are the responsibilities of a licensed pharmacist in the United Arab Emirates?

    A license issued to a pharmaceutical will bear the name of the 'licensed pharmacist,' and he or she would be responsible for the following:

  • Importing pharmaceutical products;
  • Storing pharmaceutical products;
  • Enter into contracts regarding pharmaceutical products and medical devices; and
  • Complying with the regulations of the MoH and local regulator and the provisions of the Pharmaceutical Law.
  • 9.     Are there any sanctions for submitting false documents to obtain a license to undertake the pharmaceutical profession?

    Articles 83 and 84 of Federal Law Number 4 of 1983 states that the offenders may face imprisonment of up to (1) one year along with a fine for anyone who submits false documents or information to obtain a license, and on anyone practicing as a pharmacist illegally. Article 86 of the law states that people who adulterate or imitate substances may face imprisonment of up to three (3) years and fines of up to AED 10,000.

    10.  Are there any restrictions on the ownership of pharmacies in the United Arab Emirates?

    In the United Arab Emirates, one can obtain a license for more than one medical facility. As for pharmacies, their ownership must vest either with the UAE Nationals or a UAE National must own at least 51% of the company's shares. Federal Law Number 2 of 2015 states that GCC nationals may hold one hundred percent shares in the pharmacies. One cannot obtain a license to open more than two stores except for pharmacies located in hospitals.

    11.  What happens when the licensed pharmacist gets terminated from the pharmaceutical company?

    When a licensed pharmacist resigns or gets terminated from their employment, the pharmaceutical company should submit a request through the Ministry of Health's online portal for the cancellation of the current pharmacist's license. Upon the revocation of the license, the company should then apply for a new license with another licensed pharmacist-in-charge. After this step, an application should be filed with the Department of Economic Development for the amendment of the trade license to replace the name of the licensed pharmacist with the new one.

    The Ministry of Health may take approximately 3-4 weeks to cancel a license and issue a new permit, and the Department of Economic Development would take nearly 2-3 weeks to replace the same.

    12.  Can a company's pharmacovigilance and regulatory affairs be handled and managed by the same person or is there a requirement for separate people to do the job?

    Pharmacovigilance is known popularly as drug safety and is the pharmacological science to collect, detect, assess, monitor and prevent adverse effects of the pharmaceutical products. The pharmaceutical companies assign the same licensed pharmacists to handle pharmacovigilance also; although, the MoH has not mandated that the same person should undertake both the assignments. A company is also entitled to appoint separate officials for each of these functions.

    13.  Can a company outsource the importation of medical goods or storage in the United Arab Emirates?

    Outsourcing the function of importation or warehousing to a third party is not authorized by the MoH. All medical equipment imported by a pharmaceutical company should get registered under the name of the same entity before the MoH. These medical devices and pharmaceutical products have to be stored in warehouses and medical stores which should also be under the license of that company.

     

    ]]>
    Thu, 15 Feb 2018 00:00:00 GMT
    <![CDATA[Франчайзинг в ОАЭ]]>    Liability of Franchisors

    You cannot bring the Canadian winters to the UAE, but you can enjoy the warm coffee of Tim Hortons in the UAE. UAE has the answer to most of your cravings from back home, whether you are missing the butter chicken or chicken and waffle. This multi-diverse country is a global hub of franchising. The franchising business in the United Arab Emirates (the UAE) has been developing consistently over the last couple of years. Abundant international companies have expanded their organizations in the Emirates over the recent years. Their diverse multi-social populace and their excellent business condition have transformed the UAE into a social and visitor focus positive for diversifying. The many open doors the Emirates give enable organizations for any industry to flourish. The UAE is the focal point of this dynamic franchising as it is a business gateway to the MENA region. The Emirates holds the second place in the UK about the global retail brands with Dubai as the most common choice to invest. From organic cafes and supermarkets, fancy eateries, to thrift shops and top of the line garments brands, most of the world-known names are available on the UAE marketplace.

    While the notion of franchising seems simple, several issues should be taken into consideration when dealing with this business segment. It is essential to understand the rights and obligations of the franchisor and the franchise and what are the issues and rules that one should consider before moving forward. As for the concept of franchising in the UAE, there is no specific law for the business and franchising is the subject of commercial and agency regulations, which does not differentiate, between franchise agency or distribution agreements or another form of sales agency relationship. There is no specific legislation for regulating the franchising business in the UAE, but there are numerous laws in the UAE, which governs the franchising businesses as follows:

  • Federal Law Number 18 of 1981 regarding Organization of Commercial Agencies (as amended by Law Number 14 of 1998) and as amended by Law Number 13 of 2006 (the Agency Law);
  • Federal Law Number 5 of 1985 Civil Transactions (the Civil Code);
  • Federal Law No 18 of 1993 on Commercial Transactions (the Commercial Transaction Law).
  • The Dispute Resolution

    The law in the UAE mandates that only UAE nationals or corporations wholly owned by UAE nationals or those with a UAE partner or sponsors are allowed to conduct business. However, there is an exception to the companies who have their presence in the free zones. The companies in the free zones are free to opt a foreign law to govern their agreement. On the other hand, UAE federal laws apply to commercial arrangements such as the Civil Code and the Commercial Transactions Law govern unregistered contracts or companies having their presence in UAE mainland.

    The UAE legal system differentiates between the two forms of agreements, registered agreements and unrecorded in the ministry of economics. In general terms, these laws recognize the right of parties in an unregistered deal to contract with each other on conditions as they may concur and are free to choose a foreign law to govern their agreement. And there are also some events where the local courts will not consider the parties choice of law and administer the contract under UAE law.

    Registered Agreements

    If a franchisee registers its agreement under the Agency Law, the franchise holds an extreme position regarding negotiating the termination of a contract making it very difficult for the franchisor to terminate a registered agreement. The franchisee will also be able to block imports of products covered by the franchise, which companies ship to other consignees. Thus, in practice, it is best for franchisors to take steps to ensure that no registration under the Agency Law occurs as the law favors the franchise more than the franchisor. The UAE Ministry of Economy recommends the company for applying Agency Law in UAE to register themselves and to meet the following requirements:

  • Agent must be a UAE national or a company wholly owned by UAE nationals;
  • The relationship must be exclusive; and
  • The relationship between the agent and principal should register with UAE Ministry of Economy.
  • Accountability of the Third Parties

    As in the event where the franchising agreement creates an agency, the franchisor (the principal) could be liable for acts performed by the franchise (the agent) in the ordinary course of business. It is a situation where someone is held responsible for the actions or omissions of another person.

    The rules regarding the vicarious liability of franchisors can be complicated and vary from state to state.

    In the USA

    Vicarious liability, reputedly the most common tort theory of recovery against franchisors arises from the principal-agent relationship or an employer-employee relationship between the parties to the contract. Vicarious Liability occurs because of the proven actual agency or proven apparent body and also because of direct liability, where the franchisors can Be Responsible for Its Negligence and acts or omissions.

    In the US it is the degree of control of the franchisor over the franchise in running the business that determines the liabilities that the franchisor is liable. The extent of the parent company's control and supervision over the employee and the involvement in running the business determines the actual authority of the franchisor.

    If the agent enters into a contract with a third party under his actual authority, the agreement came into will create contractual rights and liabilities between the principal and the third party.

    And the doctrine of apparent authority rests on the premise that one who causes a third person to believe someone is his agent should bear the loss associated with that third party's reasonable reliance on the presumed agent's supposed authority. For example, in Crinkley v. Holiday Inns, The Fourth Circuit Court of Appeals upheld a jury verdict against Holiday Inns. A gang of "Motel Bandits" who burst into the plaintiff's room at Holiday Inn had robbed the plaintiffs.

    The court noted that the defendant franchisor "engages in national advertising... without distinguishing between company-owned and franchised properties."  And The plaintiff's testified that they chose Holiday Inn because they thought it would be a "good place to stay" based on her previous visits to the chain

     As seen above, the franchisor's "holding out" of the franchise as being part of one business entity (using the trademark, advertising, or architecture), and the consumer's reasonable reliance on the franchisor's representations. The evident expert can likewise happen where a vital ends the specialist of an operator, however, does not advise outsiders of this end.

    Percentage of US ownership depends on the business activity and the purpose of the office the US company wishes to establish. US companies are allowed to open representative, branch or regional offices with 100% ownership, however, are limited to direct specific business exercises. If a US organization wishes to establish a business in the UAE, at that point, the law requires a joint venture with a UAE national owning at least 51% of the market.

    In the UAE

    The contract of the agency is considered a commercial deal and the agent acts according to his professional activity. Under this law, the agent carries out legal action on behalf of his client and at his request for a commission charged by the client. And any third party who contracts with the commission agent may not refer to the principal who remains a foreigner from the contract. And the agreement does not establish between the principal and any person who has contracted with the commission agent any legal relationship authorizing one of them to refer to the other under the pretext of gluttonous.[i]

    UAE Civil Code

    Article 282

    Any harm dome to another shall render the actor, even though not a person of discretion, liable to make good the harm.

    Article 313

    1.      No person shall be liable for the act of another person, but the judge may upon the application, of an injured party, and in the event. In his opinion there is justification for taking that course, render any of the following persons liable as the case may be to satisfy any amount awarded against a person who has caused the harm:

    a)      Any individual who by law or by assertion is obliged to administer a man who requires supervision by his being a newborn child or as a result of his psychological or physical condition. Unless it demonstrates that he did 'his obligation of control or that the harm would necessarily have happened regardless of whether that assignment had been, completed with the best possible care; or

    b)      any individual who has real control, by a method for supervision and heading, over a man who has caused the harm, despite that he might not have had a free decision if the demonstration causing hurt was conferred by a man subordinate to him in or because of the execution of his obligation.

    The UAE is an important market with the presence of a large number of businesses through franchising. There is no law or legislation regarding franchising in the UAE and franchising related operations are subject to civil and commercial requirements with principles of Shariah Law on business transactions. Based on the above, it becomes clear that unlike the USA, the UAE holds the view that a person shouldn't be liable for another person's act if he is not directly responsible for supervising his law and had no control over the code. Also, that the agent acts out of his capacity for running the business and the principle, i.e., the franchisor cannot be liable for the acts of the agent, i.e., the franchise.


    [i] (Ruling of the Court of Cassation - Dubai on 17-09-2007 in Appeal Number 2007/173 Commercial Appeal)

     

     

    ]]>
    Wed, 31 Jan 2018 11:28:00 GMT
    <![CDATA[Фармацевтические правила в Дубае и ОАЭ]]> PHARMACEUTICAL INDUSTRY IN THE UAE

     What are the main laws and regulations governing pharmaceutical companies in the United Arab Emirates?

  • The primary piece of legislation governing pharmaceutical companies in the United Arab Emirates is Federal Law Number 4 of 1983 concerning the Pharmaceutical Profession and Pharmaceutical Institutions (the Pharmaceutical Law). This law applies to pharmacists, pharmaceutical establishments, and governs the import, manufacture, and distribution of pharmaceutical products. Articles 63 to 67 of the Pharmaceutical Law deals with the registration of pharmaceuticals. Article 47 of the Pharmaceutical Law states that a company must obtain a license to open a pharmaceutical company and Article 48, 55 and 56 lists the conditions that the company should meet to obtain the license. These include, among others, the requirement that the company is composed of different sections (production section, chemical section, disinfection section, and bacteriological laboratories) and that licensed pharmacists should supervise the factory. Article 49 mandates that the application for a license to open a pharmaceutical company should be accompanied by the factory's contract of establishment/ articles of association and also the permit issued to the manager and the pharmacists, among other documents.
  • Federal Law Number 14 of 1995 regarding counter-measures against narcotic drugs and psychotropic substances regulate the import of (pharmaceutical products and) medicines into the United Arab Emirates.
  • Federal Law Number 5 of 1984 governs the licensing and registration requirements of physicians, pharmacists, and other professionals within the country's pharmaceutical industry.
  • Federal Laws Number 7 of 1975 and Number 2 of 1996 has laid down specific requirements for the establishment and licensing of public and private medical laboratories, clinic and hospitals in the country.
  • Federal Law Number 1 of 1979 on the Organization of Industry Affairs affect pharmaceutical companies located in the mainland as a local Emirati agent must be appointed, and their shares in the company's capital should not fall below a certain percentage.
  • Federal Law Number 2 of 2015 regarding Commercial Companies, provides further requirements applicable to companies on a general note, over matters such as licensing, the trade name, the Memorandum of Association (Articles 12 to 15).
  • The governmental regulators of each Emirate (such as the Dubai Health Authority or DHA and Health Authority - Abu Dhabi or HAAD) also issue regulations from time to time to regulate the pharmaceutical companies in their jurisdiction. The 'Dubai Community Pharmacy Licensure and Pharmaceutical Practices Guide' (February 2013) issued by the Health Regulation Department of the Dubai Health Authority focuses primarily on the licensing and protocol of institutions and professionals. This guide provides information on the administrative procedures required to set up a pharmaceutical company. It also offers instructions on purchasing, storing, dispensing, and prescribing medication and drugs. The Ministry of Health Code of Conduct also outlines the standards expected of professionals providing medical services.
  • Which governmental authorities regulate the licensing of pharmaceutical companies?

    The Ministry of Health and Prevention (MoH) is the primary body regulating the licensing of pharmaceutical companies in the United Arab Emirates. Article 65 of the Pharmaceutical Law specifies that imported pharmaceuticals should be registered with the MoH, regardless of whether or not they have been approved or registered in their country of origin. The MoH is also responsible for the regulation and implementation of health care policies in the country. Moreover, individual Emirates have also established their local health regulators to oversee the healthcare and pharmaceutical sector of their specific jurisdiction (Dubai Health Authority in Dubai, and the Health Authority - Abu Dhabi). These regulators monitor the licensing of pharmacists and pharmacies, the registration of pharmaceuticals and advertising guidelines for medications. The MoH formulates federal health policies and regulates the healthcare market in the Northern Emirates.

    What is the registration process to set up a pharmaceutical company in the UAE?

    As mentioned earlier, under the Pharmaceutical Law, pharmaceutical products, and preparations must be registered with the MoH before being imported into the national market. The market authorization holder, along with its local representatives (such as licensed distributors) are mandated to submit a new drug application to the MoH before importing or manufacturing a pharmaceutical. The local agent is wholly liable for any complaints made by customers and non-compliance with the regulations set out by the Ministry.

    The Pharmaceutical Law prohibits anyone from preparing, composing, separating, manufacturing, packaging, selling or distributing any medicine without a valid license from the MoH (Article 1). This law also mandates that companies importing pharmaceutical products or medical devices must be locally established in the United Arab Emirates and have a pharmaceutical importation license. A sole natural person may also import these products if he is UAE national.

    Are there any exceptions to the requirement that pharmaceutical products to be registered in the United Arab Emirates?

    The Pharmaceutical Law states that all pharmaceutical products imported into the United Arab Emirates must be registered with the Ministry of Health, with NO exceptions. However, the general practice has confirmed that the Ministry of Health has authorized the import of unregistered products in exceptional circumstances such as:

  • Emergency situation medicines
  • Drugs and medications required by government or semi-government health institutions
  • Registered and unregistered medication that is not available in the local market
  • Narcotic and psychotropic drugs (as per Federal Law Number 14 of 1995)
  • However, pharmaceuticals that are not registered in the country of origin cannot be imported to the UAE even under the above-mentioned circumstances.

    How can a foreign manufacturers trade, distribute and advertise pharmaceutical products in the United Arab Emirates?

    Foreign manufacturers have two options to trade and distribution of pharmaceutical products in the United Arab Emirates. They can either establish a local presence (a company in the UAE) or appoint a local agent. Given that the MoH requires all pharmaceutical products be registered, a foreign manufacturer with no local presence will have to appoint a domestic partner to obtain the necessary approvals for trade, distribution, and advertisement of the product. This allows foreign manufacturers to access the network and resources of the local agent, who may have nurtured their business relationships in the country over an extended period. The United Arab Emirates imposes restrictions on such foreign ownership and sponsoring arrangements.

    Are local agents of pharmaceutical companies regulated? If so, how?

    The appointment of a local licensed agent by pharmaceutical companies is governed by Federal Law Number 18 of 1981 concerning organizing of trade agencies. Under this statute, the local agent will distribute the pharmaceutical companies' products in the United Arab Emirates vide an agency agreement registered with the Ministry of Economy. However, the following conditions must be met by the local agent:

  • the local agent should be a UAE national, or an entity fully owned by UAE nationals (i.e., hundred percent stake owned by UAE nationals);
  • the agent's appointment will be granted exclusively for one Emirate or several Emirates; and
  • the agreement must be notarized in Arabic, and the foreign manufacturer must provide a letter confirming they have no objection to the registration;
  • The local agent will have the right to trade, distribute and advertise the pharmaceutical products, exclusively and within the confines of the territory agreed on in the distribution agreement after meeting the above criterion. The agent's exclusivity to manage the registered products means that they can block third parties from dealing with them. Agents are also entitled to a commission on the sale of the registered products and will have the right to claim compensation upon the termination of the agreement.

    Which license should a company obtain to open a medical store in the UAE?

    A person (legal or natural) that intends to set up a medical store or warehouse for medical products should obtain a medical store license to conduct their activities in the country. This is not limited to companies that deal with pharmaceutical products but also applies to businesses that store medical equipment. To obtain this license, the company must employ at least two licensed pharmacists to regulate the medical store, and these pharmacists must be in charge of the regulation of medical devices and pharmaceutical products.

    What are the responsibilities of a licensed pharmacist in the United Arab Emirates?

    A license issued to a pharmaceutical will bear the name of the 'licensed pharmacist' and he or she would be responsible for the following:

  • Importing pharmaceutical products;
  • Storing pharmaceutical products;
  • Enter into contracts regarding pharmaceutical products and/ or medical devices; and
  • Complying with the regulations of the MoH and local regulator and the provisions of the Pharmaceutical Law.
  • Are there any sanctions for submitting false documents to obtain a license to undertake the pharmaceutical profession?

    Articles 83 and 84 of Federal Law Number 4 of 1983 states that the offenders may face imprisonment of up to (1) one year along with a fine for anyone who submits false documents or information to obtain a license, and on anyone practicing as a pharmacist illegally. Article 86 of the law states that people who adulterate or imitate substances may face imprisonment of up to three (3) years and fines of up to AED 10,000.

    Are there any restrictions on the ownership of pharmacies in the United Arab Emirates?

    In the United Arab Emirates, one can obtain a license for more than one medical facility. As for pharmacies, they must either be owned by UAE Nationals or a UAE National must own at least 51% of the company's shares. Federal Law Number 2 of 2015 states that pharmacies may also be wholly owned by GCC nationals. One cannot obtain a license to open more than two stores except for pharmacies that are located in hospitals.

    What happens when the licensed pharmacist is terminated from the pharmaceutical company?

    When a licensed pharmacist resigns or is terminated from their employment, the pharmaceutical company should submit a request through the Ministry of Health's online portal for the cancellation of the current pharmacist's license. Upon the revocation of the license, the company should then apply for a new license with another licensed pharmacist-in-charge. After this step, an application should be filed with the Department of Economic Development for the amendment of the trade license to replace the name of the licensed pharmacist with the new one.

    The Ministry of Health may take approximately 3-4 weeks to cancel a license and issue a new license and the Department of Economic Development would take approximately 2-3 weeks to replace the license.

    Can a company's pharmacovigilance and regulatory affairs be handled and managed by the same person or is there a requirement for separate people to do the job?

    Pharmacovigilance is known popularly as drug safety and is the pharmacological science to collect, detect, assess, monitor and prevent adverse effects of the pharmaceutical products. Generally, the pharmaceutical companies assign the same licensed pharmacists to handle pharmacovigilance also; although, the MoH has not mandated that the same person should undertake both the assignments. A company is also entitled to appoint separate officials for each of these functions.

    Can a company outsource the importation of medical goods or storage in the United Arab Emirates?

    Outsourcing the function of importation or warehousing to a third party is not authorized by the MoH. All medical equipment imported by a pharmaceutical company should be registered under the name of the same entity before the MoH. These medical devices and pharmaceutical products have to be stored in warehouses and/ or medical stores which should also be under the license of that company.

     

    ]]>
    Thu, 25 Jan 2018 12:00:00 GMT
    <![CDATA[UAE Bankruptcy Law]]> NEW BANKRUPTCY LAW IN THE UAE

    Since the time of its promulgation in the year 2016, the Bankruptcy Law has been widely discussed and deliberated on. The enactment of Federal Law Number 9 of 2016 (the New Law) has been critical in light of the volatile oil market across the UAE and the GCC and its impact on the distressed businesses and the financial market in general. Even at the draft stage, the New Law created a lot of interest with commercial businesses and lenders expressing their interest in understanding the effects the New Law will have on securing the interests of local investors, thereby regulating the credit market.

    Erstwhile Legal Regime

    Before the enactment of the New Law, the provisions regarding the bankruptcy of traders were contained in Chapter V of the UAE Federal Law Number 18 of 1993 (Commercial Transactions Law). In addition, corresponding bankruptcy related penalizing provisions were set out in the UAE Federal Law Number 3 of 1987 (UAE Penal Code). Upon the enactment of the New Law, Chapter V of the Commercial Transactions Law, as well as provisions on crimes related to bankruptcy under the UAE Penal Code, have been repealed. The offenses and crimes have been combined and set out in Section 6 of the New Law.

    Another notable change from the old bankruptcy regime is that a debtor's failure to declare bankruptcy on his inability to pay their debts within 30 days is no longer a criminal offense.  Under the earlier regime, due to the risk of a possible imprisonment or a hefty fine, the management of distressed businesses would prefer to opt for absconding from UAE.  This change is pivotal in providing breathing space to a business which is facing a financial crunch, but which has had the potential to revive its business with the assistance of its creditors.

    Salient Features

    This Article purports to enumerate in brief the salient features of the New Law which shall assist the interested parties in understanding the manner in which the bankruptcy regime shall be initiated and undertaken. 

    A notable feature of the New Law is its wider applicability over the commercial entities. Article 2 of the New Law sets out that the New Law apply to: -

  • Companies under UAE Commercial Companies Law[i];
  • Companies and establishments in the Free Zones, which are not governed by any special provisions in relation to restructuring and bankruptcy and excludes the financial Free Zones of DIFC[ii] and ADGM[iii];
  • Sole establishments/ traders;
  • Civil companies undertaking professional activities;
  • Companies owned wholly or partially by a federal or local government (who expressly submit to the provisions of this law).
  • Importantly, the New Law provides for the introduction of a Financial Restructuring Committee (FRC) which shall be established by the Cabinet of Ministers to oversee the management of restructuring process by financial institutions licensed to facilitate an out-of-court mutual and consensual restructuring arrangement between the debtor and its creditor. Such FRC shall also maintain a list of experts in the matters of restructuring and bankruptcy, and also, maintain a register of persons against whom judgments are delivered under the New Law.  While the New Law is silent on the manner of the workings of such FRC, it is anticipated that further regulations shall be released which shall regulate and detail out on the procedures, duties, and roles of the FRC.

    It is pertinent to note that the New Law enumerates the following procedures for debtors in financial difficulty:

  • Preventive Composition[i]: This is solely a debtor-led initiative introduced for the purpose to facilitate a consensual settlement between the debtor and its creditors and restructuring its debts as opposed to filing for bankruptcy. Such debtors, shall not be in default on their debts for more than 30 days. Therefore, any debtor initiating the preventive composition scheme could be in financial distress but yet solvent. Upon receipt of the application for preventive composition from the debtor, the Court may appoint an expert to determine if the debtor can meet the condition for preventive composition. If the request for preventive composition is accepted, a trustee will be appointed by the court who, inter alia, will be instrumental in undertaking the preventive composition process including but not limited to taking inventory of the properties of the Debtor, recording all the creditors and their claim amount, preparing the Preventive Composition Scheme.  The scheme shall include terms and conditions of settlement of liability, suspension/termination of the activities of debtors, any moratorium period and payment deduction. Any scheme of composition must be approved by the majority of creditors representing two-thirds of unsecured debts, and must be approved by the court. The scheme must be implemented within three years of court approval; this can be extended for an additional three years by obtaining the approval of the majority of creditors.
  • Restructuring and Bankruptcy[ii]: In cases where the debtor is financially insolvent but the business of such debtor can still be salvaged, the court may assist such a debtor by approving a restructuring plan for the business. A debtor may make a request for restructuring process where the debtor ceases to make payment of debts for over 30 days due to financial instability, or any creditor can make a request where the debtor has failed to repay the debt of creditors or the group of creditors holding debt of at least AED 100,000/-, within 30 days from date of notice of discharge of debt by the creditor. The application and manner of execution of the restructuring scheme are similar to those of the prevention scheme, in as much as, it requires the trustee to prepare the restructuring scheme which will require the same 2/3rd creditor approval. The distinction, however, is for the implementation of the restructuring scheme, where implementation is authorized for a longer period of five to eight years (five years that can be extended by three more years).
  • It is pertinent to note that where a protective composition or restructuring scheme is not appropriate, not approved, is terminated, or where a debtor is acting in bad faith to evade their financial obligations, the court will pass a judgment declaring bankruptcy and liquidation of the assets of the debtor.
  • Obtaining New Finance

    Article 181 of the New Law provides comfort to debtors dealing with financial hardship. Pursuant to this provision, Debtors can request Court, at the time of a preventive composition scheme or restructuring process, to obtain new finance upon the terms laid down under the New Law. Importantly, such new finance, if permitted by the Court, will have priority over any other unsecured debt owed by the debtor.

    Suspension of Criminal Proceedings for Dishonored Cheques

    Upon initiation of a preventive composition scheme or restructuring process, any criminal proceedings filed against the debtor for the issue of a dishonored cheque shall be suspended. As a result of such a suspension, the recipient creditor of the cheque shall be included in the list of creditors.

    Interested Parties

    If you are a debtor:

    As set out herein, the New Law is a mechanism which awards opportunity to distressed businesses and debtors, who need certain breathing opportunity reach settlement with its creditors and continue with the operation of its business.

    If you are a creditor:

    While the New Law primarily provides a safety net and secured approach to debtors for their businesses, the success of a preventive scheme or a restructuring scheme shall be dependent on the approval of the creditors. Therefore, it is essential that the creditors review the preventive composition scheme or the restructuring scheme cautiously and prudently. Although, the right to vote on a scheme is with unsecured creditors, secured creditors have more far-reaching entitlements, in as much as, such secured creditors are entitled to enforce their security interest when the debts fall due even during the pendency of the preventive scheme or restructuring scheme. Further, the secured creditors are also entitled to take action first upon bankruptcy judgment passed by the Court.

    Liability of the Directors

    The legislators have purported to stress the importance of governance of companies and the manner in which the management undertakes its activities. This is evident from the duties and obligations imposed by the management under the terms of the Companies Law, and it is taken further under the terms of the New Law. Regarding article 144 of the New Law, directors/managers who are responsible for the losses to the Company shall be jointly liable for the debts of the company, in the event of bankruptcy, if such assets of the company are insufficient to cover 20% (twenty percent) of its debts. Therefore, it is essential that the management of the company familiarizes itself with its duties and responsibilities under the Commercial Companies Law and also have a thorough understanding of the financial position of the company and monitor any actions taken by shareholders and creditors of the company.

    Effect and Impact

    There has been a lot of speculation and conjecture on whether the Bankruptcy Law will assist in facilitating a conducive financial market for the investors. While the mechanism has been set in place, much will depend on how the courts implement it. The law is at an early stage, and on account of largely being a court-driven process, it will hinge on the expertise of the experts, trustees, and courts. Moreover, effective implementation of the law will also hinge on the infrastructure.

    Having said that, the New Law has a more far-reaching impact than the erstwhile regime in terms of providing more flexibility and comfort to distressed businesses. In effect, the New Law gives them an option to rely on it and reach a settlement with its creditors, which in turn will have a more positive impact on the UAE as a conducive financial market for international investors.

    [i] Articles 5-66 of Section 3 of the New Law

    [ii] Articles 67-151 of Section 4 of the New Law

    [i] Federal Law Number 2 of 2015

    [ii] Dubai International Financial Centre

    [iii] Abu Dhabi Global Markets

     

    ]]>
    Mon, 22 Jan 2018 00:00:00 GMT
    <![CDATA[Возникающая роль формы контрактов NEC]]> GOOD FOURTUNE- NEC4

    "It's not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change."

    - Charles Darwin

    Introduction

    Biological evolution has been "creating" lives on this earth for almost three billion years, constantly adapting everything to an ever-changing environment. It is refreshing to see how evolution works and the trick is to change a complex system by using what's already there, and namely to adapt to the change. A similar evolution took place in the engineering and construction industry recently in June 2017, when the New Engineering Contract (the NEC) 4 was released. The "out with the old and in with the new" approach in the engineering and construction industry played a vital role in how to do things differently in these sectors. An evolutionary step was taken by the NEC contract board from its predecessors "NEC3". Regarding its designers, the new generation NEC4 is a  positive development for existing users of NEC3 having a similar base. It will be considered, all over the world as an evolution in the engineering and construction industry. Based on direct feedback from industries, to support methods and provide solutions to client demands, NEC4 reflects changes in law and market practices by introducing new forms of contracts and by emphasizing on collaborative work. Through this article, you will experience the ride of evolution in the NEC world and what significant features the new NEC has to offer.

    Started From the Bottom; Now, We Are Here

    In 1993, the first NEC contract came into existence, written in simple language with the sole aim of stimulating good management. However, two years later the second edition named NEC engineering and construction contract was published with new forms of contract including professional services contracts and adjudicator's contracts along with some short forms and sub-contracts. The 20th century for NEC contracts was a great experience and a decade of extensive international application. Later in 2005, the NEC contract board launched the NEC3 contract suite. NEC3 flooded the market with term service contract, framework contract and later in 2010 with supply contracts. By the end of 2013, NEC3 was updated to 39 documents along with an enhanced set of guiding principles. It was a great success for 12 long years and was endorsed worldwide by several public and private sector undertakings with a track record of delivering timely projects within stipulated budgets.

    With the new era, new demands, new technology and with everything else that's new, it is the time for a new NEC. NEC4 arrived on 22 June 2017 in plain English and in the present tense which can be effortlessly translated and understood by people not speaking English as a first language. It simultaneously recognizes the necessity for contract administration, risk management, and terminology which will enable a flexible industry to manage, procure and deliver collaborative projects.

    What's new?

    NEC4 is an enhanced version of NEC3 or simply an upgrade with some new features and some new forms of contracts. The two most important contracts that have been added to the suite are NEC4 Design, Build and Operate (DBO) Contract and NEC4 Alliance Contract (the ALC). Targeting clients who seek construction, design, operation, and maintenance from a single contractor, DBO is the most suitable form of the contract offering a wide range of services, such as pre and post construction works which include the operation of the asset to achieve the required performance levels or more straightforward facility management. The DBO contract gives the opportunity to the client to procure a more integrated whole-life delivery system.

    On the other hand, ALC, a multi-party contract having a reliance on integrated risks and reward models, is only suitable for clients who are looking for a single collaborative contract by a fully integrated delivery team for large industrial and complex projects. The contract places its basis on achieving client objectives by working together and sharing risks and benefits. The benefit of using ALC is to form a stronger collaboration between all project participants, bound by a common interest and reducing grounds for disputes.

    Dispute Resolution Mechanism

    A new and advanced system of dispute resolution has been introduced by the NEC4, which provides a "Dispute Avoidance Board (the DAB)." It offers an alternative to two-tiered negotiation initially by senior representation followed by adjudication. DAB is most suitable for international projects and where the United Kingdom's Construction Act does not apply. The new option offered by NEC4 stipulates the appointment of DAB before the commencement of the project where the dispute will be referred to DAB before being transferred to adjudication. The procedure is similar to the FIDIC (Fédération Internationale Des Ingénieurs-Conseils)  contract, where either party under the contract can refer the dispute to DAB, whose decision is binding on both the parties. The DAB, however, under NEC4 will itself take the initiative to resolve potential disputes between the parties. The DAB will practically carry out periodic inspections throughout the life of the project to identifying potential disputes. Fostering a collaborative environment which will prevent the crystallization of disputes, is the intention of the makers which is transparent and outright from the wording of the contract.

    Evolution, Not Revolution

    Leaving behind traditional methods of procurement and limited forms of contract, NEC4's suite of contracts is described as an evolution and not a revolution in the engineering and construction industry. Following new features of next generation, NEC4 identifies and adapts to the constantly changing technology and environment:

           i.          Scope of improvement

    The new NEC4 contract contains a special feature for either party to identify the opportunities and to simultaneously improve the outcome of the project. The project manager has the right to accept, reject or request a quotation before making any decision. The contract can instruct for acceleration in works to complete the project prior to the completion date. NEC4 provides a new option allowing the contractor to alter the scope by reducing the cost of an asset over its whole life.

          ii.          Cost

    Cost for professional services, term service, and supply contracts is now defined in the same way as an engineering construction contract (the ECC), providing a common approach to all contracts for a closer integration of participants and in the supply chain.

         iii.          Harmonious system for resolving dispute

    NEC4 has introduced a mandatory requirement for consensual dispute resolution by appointing a senior representative by each party to negotiate the dispute and reach a temporary solution. The Engineering contract offer two options W1 and W2 where option W1 is for projects where UK's Construction Act does not apply, and option W2 where the act applies. The consensual dispute resolution under NEC4 is compulsory under Option W1 whereas, under option W2 only where UK's Housing, Grants, Construction, and Regeneration Act 1996 apply.

        iv.       Payment Mechanism

    The contractor is obliged under the new contract to file an application for periodic assessments and a contractor failing to submit such an application will not receive any payment. If the the payment is due to the client, the project manager will make the necessary assessment and will certify the payment. This approach used to be applicable to short forms of contracts only.

        v.        Building Information Modelling (BIM)

    This is a new option available under the ECC especially used for supporting the use of BIM. The contractor is required to provide an information execution plan either in the contract or within the client's defined time-period. The plan submitted by the contractor must have the ability to satisfy the BIM requirements set out by the client.

        vi.          Confidentiality Clause

    Most of the NEC4 contracts, except for the short ones, include core clauses restricting the disclosure of confidential project information. This clause meets the client's requirements for avoiding the need for additional amendments at a later stage.

    GCC welcoming NEC4

    In 2007, during the construction boom in the UAE's economy, the leading developer Aldar Properties was the first to adopt NEC3 at Al Raha Beach in Abu Dhabi. The Middle East's first experience of NEC contracts is still considered one of the largest contracts ever acknowledged by the Emirates. Similarly, NEC4 will likely to be appreciated worldwide considering the success of its predecessors. Given the predominance of the FIDIC contract worldwide, it will be challenging for NEC contracts to mark their grounds, especially in GCC countries.

    The NEC suite of contracts, unlike FIDIC, is based on principles of good faith, a well-recognized concept under Shariah Law and which enshrines in most of the Gulf countries' legal systems. Adapting takes time, transferring to NEC contracts would be time-consuming but fruitful. Away from all historical adversities, and undertaking projects and works programmes for large groups, NEC4 provides an opportunity for successful outcomes.

      ]]>
    Sat, 30 Dec 2017 03:00:00 GMT
    <![CDATA[UAE Criminal Law and Contradictory Statements]]> Contradictory Statements

    In a bundle of truths, a lie will always be found within.

    Pinocchio told lies, and his nose grew. Unfortunately, liars in the courtroom may only be caught out by the inconsistent statements they make throughout a case. The challenge is for the jury and prosecution to find out the truth, the whole truth and nothing but the truth. The prospect of success in a court case is dependent upon the judge and jury believing the story put forward by the prosecution, beyond a reasonable doubt. To reach this decision, the jury must not doubt that the accused is guilty or not guilty. A combination of the defendant's explanation of events along with any witnesses available to testify is then put forward in front of the court for them to reach a conclusive decision as to whether the defendant is accountable.

    Legality of Contradictory Statements

    In legal terms, a contradictory statement is an incompatibility and clear opposition to two ideas which are the subject of the same proposition. Whether it be the defendant on the stand accused of a crime, providing insufficient information to what has been previously provided or if one or more witnesses reenact the chain of events that occurred, but do not portray a mirrored story, contradictory statements lead to much confusion for the judge and jury.  When a statement made has been contradicted by another in court, the jury is led to believe that all accounts made from that point onwards are false. Any evidence that would seem credible is now unreliable. A contradictory statement made in court signifies that the person making such statement has been untruthful at some point during their account.

    It is a public perception that perjury is a hard crime to prove. In most US jurisdictions, the two-witness rule is used to discover whether the accused has committed such a crime. Under the two-witness rule, it must be proven that the defendant's statements made would be contradicted by at least two witnesses. As above mentioned, the difficulty of proving a defendant has committed perjury amounts from the fact that at common law the accused cannot be convicted of perjury based only on a contradictory statement made unless it is then established by the prosecution that either of the statements made which contradict one another is false. With evidence and witness statements, once the above is proven, a successful prosecution of perjury can be brought against a person.

    The laws in place among global jurisdictions highlight the importance of witnesses, and the accused told the truth under oath in court. It is understandable for a witness that attending court is a daunting experience. The directions given by the court is to make sure that the process for a witness is as comfortable and safe as possible.

    Within court proceedings, it has not been unknown for witnesses to contradict what was originally recorded in their witness statements. As time has elapsed since the statement was written, witnesses have had the opportunity to recollect on the events they saw and question whether what they noted shown the accurate picture. The process of a witness providing the court with their account of the facts first starts with the witness documenting and signing the statement of truth to confirm what they have recorded are to their knowledge the true, accurate events that took place. If a witness is called to the stand and contradicts a statement previously made by themselves or another witness with a similar account, the testimony given is weak, leading the jury to discredit all that they have heard up to this point which may have damaging effects for the defense or prosecution.

    A contradictory statement can result in the accused being convicted of a crime they may not have committed. In the case of E v Joyce, several witnesses had identified the defendant through detailed statements and confirmed they had the correct identity of the person they saw. At the trial, the witnesses stated that they were now not certain whether their identification was correct. The trial judge admitted the earlier statements as evidence of the first identification being the accused. With this, the jury convicted the accused.

    Witness Testimony

    The strength of a witness's statement is paramount to win the case. A contradictory comment, regardless of the effect it may have on proving the defendant's guilt, will be noted.  The single purpose of cross-examination is not only to get the truth from the accused or witnesses but to decipher statements that align, against those that appear suspicious and do not match up with other evidence available to that case.  It cannot be concluded that in every instance of a contradictory statement that the witnesses or the accused is lying. Taking into consideration the complexity of each case, certain questions put forward by the defense and prosecution during cross-examination will be heard or construed differently by the person on the stand under oath.

    A witness is at a greater disadvantage to the lawyer as they approach the stand. The witnesses are not aware of documents they cross-examiner may have which directly impacts on the statement they presented. There is no preparation given to a witness. A statement is made and signed and read out again by the witness in front of the court. It is necessary that witnesses are given recognition for their ability to show their account, regardless of whether they contradict a certain event happening. In these situations, however, the opposing side take it upon themselves to highlight any contradictory statement made regardless of the sincerity behind it, to induce the jury to see that a witness is lying, therefore, their story so far is imperfect.

    The defendant enters the court followed by the misconception by the jury that they are guilty of the crime before they are given the opportunity to defend themselves. Straight contradiction implies to the court that when the accused speaks falsely about a certain point, they are speaking falsely about all points they have raised. Implications arise here as it could be perceived by the jury that the accused is self-incriminating themselves by contradicting earlier statements. Irrespective of whether the story matches other evidence presented and highlights to the jury that the defendant is innocent, a contradictory statement prompts negative reviews from the jury about that person's ability to tell the truth, the whole truth and nothing but the truth.

    Self-contradiction can be brought out by the skills used in cross-examination or from the accused's statements previously made. Statements and evidence used against the defendant create panic and can result in them then self-contradicting points they have made to explain or justify why whatever has been presented does match. As abovementioned throughout the article, contradictory statements signify to the jury who is possibly telling the truth and who is lying allowing them to reach a valid conclusion based on what they have heard on whether the accused is guilty or not.

    It seems that a contradictory statement can easily be made in court and will damage the credibility of the information put forward by the accused or the witnesses. Unfortunately, the jury does not take these statements lightly which may result in serious impacts to the case. As abovementioned in the legal definition of a contradictory statement, the information provided by the defendant or witnesses must be inconsistent with previous. The wording of inconsistent rather the use of different provides uncertainty as a mere mistake made of such an exact time something happened or the exact coloring of clothing the defendant was wearing may only be a slightly variable to what evidence or other statements display.

    ]]>
    Thu, 07 Dec 2017 06:37:00 GMT
    <![CDATA[Aviation Country Guide: UAE - Q & A]]> Part 1 - General

    1.1  Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction.

    The UAE's principal legislation governing aviation law is as follows:

    • Federal Law Number 20 of 1991 regarding the civil aviation (the Civil Aviation Law);
    • Federal Law Number 4 of 1996 concerning the Aviation Authority (the Aviation Authority Law); 
    • Federal Law Number 20 of 2001 concerning the amendments in the Aviation Authority Law; and
    • Federal Law Number 8 of 1983 issuing Commercial Transaction Law, providing rules for Air Carriage.  
    • Federal Act Number 22 of 1972 concerning the participation by the UAE in the project for the establishment of an Arab Testing Unit for Air Navigation Equipment.
    Regulations include:
    • Civil Aviation Regulation – Licensing Regulation of July 2011;
    • Civil Aviation Regulation – General Regulation of March 2013;
    • Civil Aviation Regulation – Operations Regulation of July 2011;
    • Civil Aviation Regulation – Airworthiness Regulations of July 2011;
    • Civil Aviation Regulation – Aviation Safety Regulations of February 2011;
    • Civil Aviation Regulations – Aviation Security Regulations of May 2016;
    • Civil Aviation Regulation – Air Navigation Regulations of September 2011;
    • Civil Aviation Regulation – Aerodromes Emergency Services of February 2017;
    • Civil Aviation Regulation – Safety Management System of June 2016;
    • Civil Aviation Regulation – Concerning Unmanned Aircraft System (CAR UAS) in February 2017;
    • Civil Aviation Regulation – Transport of Dangerous Goods by Air of May 2015;
    • Civil Aviation Regulation – Foreign Operators Regulation of October 2016; and
    • Civil Aviation Regulation – Light Sports Aircraft of March 2013.
    The Civil Aviation Law applies to all aircraft registered in the UAE, air traffic control, communications and civil airports, whereas the Aviation Authority Law has established the General Civil Aviation Authority (the GCAA). The GCAA is the regulatory authority which is designated to ensure proper compliance with the Civil Aviation Law in the UAE, whilst emphasizing the concept of security and safety. Having exclusive authority over the aviation industry in the UAE, the GCAA is responsible for en-route air navigation services and all aspects of air safety.   Subsequently, each Emirate has its own aviation authority which regulates all matters related to aviation in its respective Emirate, such as the Dubai Aviation Authority established under Law Number 21 of 2007, Department of Abu Dhabi Civil Aviation, Department of Civil Aviation of Ras Al Khaimah, Sharjah Department of Civil Aviation, Department of Civil Aviation Fujairah.  

    1.2  What are the steps which air carriers need to take in order to obtain an operating license?

    There are several steps involved in obtaining an operating license for air carriers which are as follows:   Pre-application Stage: Prior to submitting an online application, the applicant is required to meet with the GCAA and should discuss his initial plan during his pre-application meetings. During this stage, the applicant submits a pre-application statement of intent and the documents required by the GCAA. On the basis of information provided by the applicant, the GCAA will provide the formal application to be submitted by the applicant.   Formal Application Stage: This stage commences when the applicant submits a formal application for an Air Operator Certificate (the AOC) along with several documents and manuals describing its operations as directed by the GCAA. The application should begin at least 90 days prior to the actual revenue operations.   Document Evaluation Stage: This stage involves a detailed evaluation of documents and manuals for their content and compliance. During this stage, the GCAA will ascertain the technical fitness of the operations proposed by the operator. The documents and manuals submitted for consideration should not be at least 60 days prior to the commencement of proposed operations in order to avoid undue delay.   Inspection Stage: During this stage, the GCAA will inspect whether or not the physical facilities and equipment proposed by the applicant are suitable for the type and size of the operations. The applicant must demonstrate his ability to comply with all requirements and operating practices prior to the beginning of actual revenue operations.   Certification Stage: The stage begins when the GCAA is satisfied from the applications and proposed operations of the applicant and takes a necessary step to issue AOC. However, if the GCAA is unsatisfied during the Inspection Stage, the Certification Stage will not take place until the safety and security requirements are complied with.  

    1.3   What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety?

    The principal piece of legislation which governs air safety is the Civil Aviation Law; however, there is Aviation Safety Regulations (the Safety Regulation) of February 2011 which governs the air safety. The Safety Regulation consists of three chapters which include passenger cabin safety, transport of dangerous goods by air, aviation accident and incident investigation.   The Aviation security affairs sector administer and provide safety to the aviation industry, and the sector consists of several departments as follows:
    • Air Navigation and Aerodrome (the ANA);
    • Airworthiness (the AW);
    • Flight Operations (the FOP);
    • Licensing (the LIC); and
    • Policy, Regulations, and Planning (the PRP).

    1.4   Is air safety regulated separately for commercial, cargo, and private carriers? Are air charters regulated separately for commercial, cargo and private carriers?

    Commercial aircrafts, as well as private aircrafts, e regulated pursuant to the Civil Aviation Regulations on Air Safety of February 2011, and the Civil Aviation Regulations on Transport of Dangerous Goods by Air of May 2015 regulates cargos.   Air charters for commercial, cargo, and private carriers are regulated under the Air Safety Regulation of February 2011.  

    1.5 Are airports state-owned or privately owned?

    All the major airports in each Emirate are owned by the government of the respective Emirate or the Department of Civil Aviation in that Emirate. However, there are several privately-owned airports in Abu Dhabi, such as: Al Futaysi Airport, owned by Hamad bin Hamdan Al Nahyan; Al Jazeirah Airport, owned by Al Jazeirah Aviation Club; Arzanan Airport, owned by the Zakum Development Company; and Buhasa Airport, owned by the Abu Dhabi Company for Onshore Oil Operations.  

    1.6   Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?

    UAE airports impose several charges on outbound and inbound airlines, as follows:
    • Passenger Service Charges (the PSC), which is to be paid by the outbound airline. Infants, aircraft operating crew and transit/ transfer passengers continuing travel within 24 hours are exempted from PSC.
    • Passenger Security and Safety Fee (the PSSF), payable on outbound airlines. Infants, aircraft operating crew and transit/transfer passengers continuing travel within 24 hours are exempted from PSSF.
    • Advance Passenger Information Fee (the API) for arriving passengers on inbound airlines. Infants, aircraft operating crew and transit passengers continuing travel within 12 hours are exempted from API.
    • Passenger Facility Charge (the PFC), which has recently been implemented and is payable by outbound airlines for departing passengers. Infants, operating crew and transit passengers with two flights on the same journey are exempted; however, transfer passengers are obliged to pay this charge.

    1.7    What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?

    Civil Aviation Regulation Part VI-Chapter 3 (the Air Accident Regulation) applies to air accident and incident  investigation(s).  The Air Accident Regulation governs commercial, private, leased and chartered aircraft. It further includes, but is not limited to, the procedure for investigation, objectives of the investigation,  powers of investigators, responsibilities of the GCAA, the roles of the investigating committee, investigations conducted by foreign states, besides other key provisions.   Procedure:
  • Any person having knowledge of an aircraft accident or incident should immediately notify the GCAA, and such notification should include all the details including, but not limited to: the manufacturer, model, nationality, registration mark and serial number of the aircraft; complete details of the owner; the date and time of the accident; complete details of the flight commander and cabin crew; the last point of departure; and the landing destination;
  • Upon the receipt of the information, the GCAA will request that the state of the operator, the state of the manufacturer and the state of design provide the complete details regarding the aircraft.
  • Thereafter, the GCAA will establish an Accident Investigation Committee to investigate the cause of such accident.  

    1.8   Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports?

    The Dubai Government is planning to increase the number of flights, and it is anticipated that it will handle 100 million passengers on a daily basis.

    Part 2 Aircraft Trading, Financing, and Leasing

     

    2.1    Does registration of ownership in the aircraft register constitute proof of ownership?

    The GCAA, after having approved the application, will register the aircraft, including complete details of the aircraft in the Certificate of Registration (COR), and will hand over the COR to the owner of the aircraft or his representative, which will constitute proof of ownership.

    2.2    Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?   There is no mortgage register in the UAE; however, the creditors financing the foreign aircraft must have the existence of any foreign- registered mortgage noted by the GCAA in its files.   The GCAA also has the authority to acknowledge irrevocable de-registration and export request authorization, registered under the Cape Town Convention in an international registry.   All the aircraft mortgages in the UAE are required to be registered in the Aircraft Register, along with the prior approval of the GCAA. Post the mortgage, the GCAA will issue a new Certificate of Registration, upon submission of following documents:
    • A certified copy of the certificate of a true commercial name of the entity, issued by the Commercial Registry of the state in which it was registered;
    • a certified copy of the Board Resolution;
    • a notarized confirmation letter signed by the entity's legal representative; and
    • the changed registration plate.

    2.3    Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?

    In accordance with Article 28 and 29 of the Civil Aviation Law, the GCAA has the authority to register the aircraft in the name of lessor, if he is a qualified person. The aircraft will remain registered for the duration of the lease agreement period, subject to provisions of the Civil Aviation Law.

    2.4    As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed 'on-wing' on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

    The Civil Aviation Law is silent on the concept of title annexation wherein the ownership or security interests in a single engine are  at risk due to automatic transfer upon installation 'on-wing' on an aircraft.

    2.5    What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

    Federal Decree Number 8 of 2017 concerning Value Added Tax (the VAT Law) is applicable to companies incorporated in the UAE. Therefore, companies are obliged to pay five (5) percent VAT on all goods and services; however, there are several exemptions for certain goods and services, within which a zero-tax rate will apply, such as the supply of means of transport by air used to transport passengers and goods, or the supply of aircraft specifically for assistance in rescue by air.

    2.6    Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?

    The following are the international Conventions signed by the UAE:
    • The Cape Town Convention on International Interests in Mobile Equipment signed on 2 April 2008.
    • The Convention for the Suppression of Unlawful Acts Against Safety of Civil Aviation (the Montreal Convention), signed on 23 September 1971.
    • The Chicago Convention.
    • The Convention on Offences and Certain Other Acts Committed on Board Aircraft (the Tokyo Convention), signed on 14 September 1963.
    • The Warsaw Convention for Unification of Certain Rules Relating to International Carriage by Air, signed in 1929.
    • The Convention on Suppression of Unlawful Seizure of Aircraft (the Hague Convention), signed on 16 December 1970.

    2.7    How are the Conventions applied in your jurisdiction?

    The UAE has ratified numerous international Conventions in relation to civil aviation, and have simultaneously given them legal status through the following statutes:
    • Federal Decree 95 of 1980 approving the state's Accession to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, signed at Montreal on 23 September 1971.
    • Federal Decree Number 8 of 1981 approving the state's accession to the Convention for the Suppression of Unlawful Seizure of Aircraft, signed at The Hague on 16 December 1970.
    • Federal Decree Number 9 of 1981 approving the state's accession to the Convention on Offences and Certain Other Acts Committed On Board Aircraft, signed at Tokyo on 14 September 1963.
    • Federal Decree Number 13 of 1986 concerning the state's accession to the Warsaw Convention for the Unification of Certain Rules relating to International Carriage by Air (1929).
    • Federal Decree Number 85 of 1986 concerning the state's membership of the World Meteorological Organization.
    • Federal Decree Number 79 of 1988 ratifying the state's accession to the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for Suppression of Unlawful Acts against the Safety of Civil Aviation.
    The GCAA ensures compliance with the aforementioned international treaties and Conventions to which the UAE is a party  

    Part 3 Litigation and Dispute Resolution

    3.1    What rights of detention are available in relation to aircraft and unpaid debts?

    There are no detention rights that exist with respect to unpaid fees or any air navigation fees. However, the GCAA can recover the amount by filing a civil action in a civil court against the owner, operator or lessee of the aircraft.

    3.2    Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement?

    The UAE does not recognize the self-help regime; however, pursuant to the Civil Aviation Regulations and Civil Aviation Advisory Publication Number 58, the GCAA has framed a procedure for irrevocable De-Registration and Export Request Authorization (IDERA), under which an approval from the UAE courts is not required. An IDERA entered into by a lessor and financier allows them to initiate self-help proceedings.   However, with regard to leases of aircraft, there are, primarily, three types of leases available, as follows:
    • Wet Lease: Under a Wet Lease agreement, the company which is leasing out the aircraft is required to provide Aircraft, Crew, Maintenance, and Insurance (ACMI) to the lessee. The Wet Lease is for a short time span, and during that span, the lessor holds the AOC, whereas the lessee is obliged to pay other charges or fees such as airport fees, charges, and other duties. The lessee even has financial control over the aircraft operations.
    • Damp Lease:  In a Damp Lease, the lessor provides the aircraft, maintenance, and insurance, except the crew. Thus, it is the responsibility of the lessee to hire the crew.
    • Dry Lease: Under this arrangement, the lessor is only obliged to provide the aircraft; the rest is maintained by the lessee.
    This lease is for more than a year and can be extended up  to half the life of the aircraft. The lessee in this lease has to obtain its own AOC.   Civil Aviation Regulation Part I, including Definitions, also defines Dry Lease and Wet Lease as mentioned above.  

    3.3    Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For example, is there a distinction in your country regarding the courts in which civil and criminal cases are brought?

    There are no specific courts assigned for resolving aviation disputes; UAE courts adjudicate aviation disputes in the country, depending upon the value of the dispute and the Emirate in which the aircraft is situated.   The UAE has signed and acceded to the Cape Town Protocol, which outlines that parties to an agreement, contract of sale, guarantee, and agreement may decide the law governing their disputes.  

    3.4   What service requirements apply to the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

    Court proceedings in the UAE initiate by filing a claim in the relevant court along with the court fees. The claim is served on each defendant in the proceedings personally; however, if the court is unable to locate the defendant, investigations are carried out by several government authorities in the respective Emirate, and if this investigation is unsuccessful, the court orders that the service takes place by way of publication in the newspapers in both languages (Arabic and English). However, for parties residing outside the jurisdiction of the court or outside UAE territory, the court will permit the service of court proceedings directly to the other party residing outside the country.  

    3.5   What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on: i) an interim basis, and ii) a final basis?

    The remedies available to the claimant generally depend on the nature and size of the dispute in addition to type of forum (arbitration (domestic or international), the DIFC., the ADGM by way of example) The remedies may be awarded as follows:   Interim basis
  • the preliminary injunction, to prevent the other party from doing something until the final judgment is passed; and
  • damages.
  • Final basis
  • damages;
  • orders to hold possession of the aircraft;
  • de-registration of an aircraft;
  • sale of an aircraft; and
  • final injunctions requiring one party to do something and
  • simultaneously prevent the other party from a certain act.
  • 3.6   Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise?

    Yes, parties to the dispute have the right to file an appeal in the relevant court against the decision of a lower court or of an arbitral tribunal.   Parties can file appeals in the Court of Appeal against the final decision passed by the Court of First Instance in relation to issues of law. However, the law imposes a time limitation on such appeals, which is of thirty (30) days, within which the appellant should file an appeal in the court.   The Decision passed by Arbitral Tribunal is binding upon the parties; however, there are certain cases in which the decision passed by the arbitral tribunal can be set aside by the Court of Appeal or other relevant courts, which are as follows:
    • invalidity of the arbitration agreement;
    • failure to adhere to the rules and regulations of arbitration proceedings;
    • the award passed by the tribunal is beyond the scope of
    • submission to arbitration;
    • the arbitral tribunal was not composed within the rules and procedures agreed between the parties; and
    • the dispute between the parties is not arbitrable in nature.

    Part 4 Commercial and Regulatory

    4.1    How does Dubai and the UAE approach and regulate joint ventures between airline competitors?

    Joint ventures between airlines are regulated by Federal Law Number 2 of 2015 concerning Commercial Companies. There are several types of joint ventures, such as a Limited Liability Company, Public Joint Stock Company, Private Joint Stock Company and Limited Partnership Company. The LLC is considered the most suitable option, due to its flexible management system. The main consideration in choosing a joint venture on the UAE mainland is the shareholding ratio, which is restricted to 49 percent for a foreign company.

    The company also has an option to opt for a free zone for establishing a joint venture. A free zone offers several advantages, such as the availability of 100 percent ownership in the venture.

    4.2    How do the competition authorities in your jurisdiction determine the 'relevant market' for the purposes of mergers and acquisitions?

    The competition authorities do not provide any clear guidance in order to explain what constitutes a "relevant market". However, Federal Law Number 4 of 2012 on Regulation of Competition (the Competition Law) defines a relevant market as a commodity, service, or a group or products or services which may be substituted, on the basis of its price, characteristics and uses, or whose alternatives may be chosen to meet customers' needs in any specific geographical area.

    However, the definition of the relevant market may vary according to the establishment's position in the market, economic consideration captured by the company, or any restrictive agreement signed by the parties.

    4.3   Does Dubai or UAE have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies?

    Yes, parties entering into a merger or capturing a significant economic consideration in the market are obliged to notify the Ministry of Economy (MOE) of the relevant Emirate. The notification must take place thirty (30) days prior to the signing of the merger agreement

    4.4  How do Dubai or UAE approach mergers, acquisition mergers, and full-function joint ventures?

    The Competition Law regulates mergers,  acquisition mergers, and full-function joint ventures. The Competition Law includes restrictions on anti-competitive practices and simultaneously imposes merger control measures. The Competition Law provides that the acquirer of a proposed economic concentration which has the potential to affect the relevant market is required to inform the Ministry of Economy thirty (30) days prior to the commercial transaction. Also, it is obligatory for the companies to inform the MOE if the market share of the parties exceeds forty (40) percent of the total transactions undertaken in the relevant market.

    4.5  Please provide details of the procedure, including time frames for clearance and any costs of notifications 

    The Competition Law provides that, in a proposed economic concentration which will have a severe impact on competition in the relevant market or will create a dominant position of the acquirer, the procedure through which the acquirer can seek clearance from the MOE is as follows:

    The acquirer should submit an application in order to seek pre-approval from the Competition Authority of the MOE thirty (30) days prior to the contract.

    Post receiving the application, the competition authority will undergo a substantive test.

    Through the substantive test, the competition authority will ascertain the effects of the merger in the relevant market and whether or not the merger will create a dominant position in the market. However, it is still unclear whether or not parties can proceed with signing the agreement without actually obtaining approval from the authority. There is no specific cost for notifying the authority regarding a merger.

     

    4.6  Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid?

    The GCAA does not specifically provide rules governing financial support for air operators and airports.

    However, the Dubai Government recently planned for an initial $3 billion financial deal in order to support Dubai International Airport and Al Maktoum International Airports. Financial support will be provided by a consortium of Dubai entities, including the State- owned Investment Corporation of Dubai, the Dubai Department of Finance, and the Dubai Aviation Corporation.

     

    4.7 & 4.8  Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? What are the main regulatory instruments governing the acquisition, retentio and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines?

    The UAE government does not provide any subsidies to aircraft with respect to particular routes.

    Federal Law Number 5 of 2012 on Combatting Cybercrimes (the Cybercrime Law) is the primary piece of legislation which governs the acquisition, retention, and use of passenger data.

    Passengers have the right to limit the information held by airlines or to make any changes to such information. The Cybercrime Law imposes severe penalties on the accused when actions result in the disclosure of personal information to the public.

    4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions?

    The Cybercrime Law does not specifically lay down obligations on the airlines in the event of loss of personal data; however, there is an obligation on the data controller to ensure that the data is processed properly and to take preventive measures against the unauthorized use or disclosure of personal data.

    4.10   What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature?

    The protection of intellectual property covers protection of trademarks, patents, copyright, geographical indications and industrial designs. The laws regulating intellectual property are:

  • Federal Law Number 31 of 2006 pertaining to Industrial Regulation
  • and Protection of Patents, Industrial Designs, and Drawings; 
  • Federal Law Number 7 of 2002 concerning Copyrights and Neighbouring Rights; and 
  • Federal Law Number 37 of 1992 on Trademarks as amended by Law Number 8 of 2002.
  • The aforementioned types of intellectual property can be protected by filing an application with the MOE, which undertakes a substantive test. Thereafter, upon satisfying itself of the validity of the documents submitted, the MOE issues the registration certificate to the owner of the intellectual property.

    4.11 to 4.13   Is there any legislation governing the denial of boarding rights? What powers do the relevant authorities have in relation to the late arrival and departure of flights? Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

    4.11 The GCAA does not have any specific regulations governing the denial of boarding rights; however, each major carrier in the UAE, such as Emirates, Etihad and Flydubai, has its own conditions for carriage and its own rules by which it may deny passengers their boarding rights.

    On a similar note, passengers denied boarding rights involuntarily are entitled to claim compensation.

    4.12 Under the Air Transport Regulations of 2007, the Department of Transport obliges the aircraft operators to establish minimum service quality standards, which include compensation for delayed flights.

    4.13 The authorities managing airports  in the  respective  Emirates are regulated by Federal Law Number 2 of 2015 on Commercial Companies (the Companies Law). For example, the Dubai Airports Company in the Emirate of Dubai is the airport authority regulating Dubai International Airport and Al Maktoum International Airport, under the Companies Law.

    4.14 to 4.17  To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? What global distribution suppliers (GDSs) operate in your jurisdiction? Are there any ownership requirements pertaining to GDSs operating in your jurisdiction?Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

    4.14  Federal Law Number 24 of 2006 on Consumer Protection does not specifically govern the relationship between the air operator and the passenger.

    4.15 The Major Global Distribution Suppliers in the UAE are Rakha Al- Khaleej International LLC and Global Distribution FZE.

    4.16  GDSs operating in the UAE can be in the form of Limited Liability Company, wherein fifty-one (51) percent of the shares are held by a UAE national.

    4.17 Yes, air operators or airports can enter into joint ventures or mergers, as mentioned in question 4.1.

     

    Part 5 In Future

    4.1    In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

    In order to improve the safety of helicopters operating in the UAE, the GCAA issued Information Bulletin of 2017, on 8 February, which provides the guidance applicable to the Civil Aviation Advisory Publication (CAAP). The guidelines must be complied with from 1 January 2018 by the following operators:
    • CAAP 70 operators must ensure that they adhere to the physical specifications and register themselves with the GCAA, and should obtain a landing area certificate.
    • CAAP 71 operators are required to obtain a primary accountable organization approval from the GCAA.

     

     

    STA is an international law firm headquartered in the Emirate of Dubai, UAE with a multijurisdictional presence. STA offers a multifaceted and well-rounded approach to addressing the legal needs of corporate clients, banking institutions, national and multinational corporations. STA's team of lawyers in Dubai and across UAE, Middle East, Asia and Europe work alongside several groups of companies within the Oil and Gas, Maritime, Real Estate, Construction, Hospitality, Aviation and Healthcare sectors regionally and internationally.

     

    Originally Published in ICLG to Aviation Law 2018

     

     

    Aviation Law Guide: United Arab Emirates

    Part 1 - General

    1.1  Please list and briefly describe the principal legislation and regulatory bodies which apply to and/ or regulate aviation in your jurisdiction.

    The UAE's principal legislation governing aviation law is as follows:

    • Federal Law Number 20 of 1991 regarding the civil aviation (the Civil Aviation Law);
    • Federal Law Number 4 of 1996 concerning the Aviation Authority (the Aviation Authority Law); 
    • Federal Law Number 20 of 2001 concerning the amendments in the Aviation Authority Law; and
    • Federal Law Number 8 of 1983 issuing Commercial Transaction Law, providing rules for Air Carriage.  
    • Federal Act Number 22 of 1972 concerning the participation by the UAE in the project for the establishment of an Arab Testing Unit for Air Navigation Equipment.
    Regulations include:
    • Civil Aviation Regulation – Licensing Regulation of July 2011;
    • Civil Aviation Regulation – General Regulation of March 2013;
    • Civil Aviation Regulation – Operations Regulation of July 2011;
    • Civil Aviation Regulation – Airworthiness Regulations of July 2011;
    • Civil Aviation Regulation – Aviation Safety Regulations of February 2011;
    • Civil Aviation Regulations – Aviation Security Regulations of May 2016;
    • Civil Aviation Regulation – Air Navigation Regulations of September 2011;
    • Civil Aviation Regulation – Aerodromes Emergency Services of February 2017;
    • Civil Aviation Regulation – Safety Management System of June 2016;
    • Civil Aviation Regulation – Concerning Unmanned Aircraft System (CAR UAS) in February 2017;
    • Civil Aviation Regulation – Transport of Dangerous Goods by Air of May 2015;
    • Civil Aviation Regulation – Foreign Operators Regulation of October 2016; and
    • Civil Aviation Regulation – Light Sports Aircraft of March 2013.
    The Civil Aviation Law applies to all aircraft registered in the UAE, air traffic control, communications and civil airports, whereas the Aviation Authority Law has established the General Civil Aviation Authority (the GCAA). The GCAA is the regulatory authority which is designated to ensure proper compliance with the Civil Aviation Law in the UAE, whilst emphasizing the concept of security and safety. Having exclusive authority over the aviation industry in the UAE, the GCAA is responsible for en-route air navigation services and all aspects of air safety.   Subsequently, each Emirate has its own aviation authority which regulates all matters related to aviation in its respective Emirate, such as the Dubai Aviation Authority established under Law Number 21 of 2007, Department of Abu Dhabi Civil Aviation, Department of Civil Aviation of Ras Al Khaimah, Sharjah Department of Civil Aviation, Department of Civil Aviation Fujairah.  

    1.2  What are the steps which air carriers need to take in order to obtain an operating license?

    There are several steps involved in obtaining an operating license for air carriers which are as follows:   Pre-application Stage: Prior to submitting an online application, the applicant is required to meet with the GCAA and should discuss his initial plan during his pre-application meetings. During this stage, the applicant submits a pre-application statement of intent and the documents required by the GCAA. On the basis of information provided by the applicant, the GCAA will provide the formal application to be submitted by the applicant.   Formal Application Stage: This stage commences when the applicant submits a formal application for an Air Operator Certificate (the AOC) along with several documents and manuals describing its operations as directed by the GCAA. The application should begin at least 90 days prior to the actual revenue operations.   Document Evaluation Stage: This stage involves a detailed evaluation of documents and manuals for their content and compliance. During this stage, the GCAA will ascertain the technical fitness of the operations proposed by the operator. The documents and manuals submitted for consideration should not be at least 60 days prior to the commencement of proposed operations in order to avoid undue delay.   Inspection Stage: During this stage, the GCAA will inspect whether or not the physical facilities and equipment proposed by the applicant are suitable for the type and size of the operations. The applicant must demonstrate his ability to comply with all requirements and operating practices prior to the beginning of actual revenue operations.   Certification Stage: The stage begins when the GCAA is satisfied from the applications and proposed operations of the applicant and takes a necessary step to issue AOC. However, if the GCAA is unsatisfied during the Inspection Stage, the Certification Stage will not take place until the safety and security requirements are complied with.  

    1.3   What are the principal pieces of legislation in your jurisdiction which govern air safety, and who administers air safety?

    The principal piece of legislation which governs air safety is the Civil Aviation Law; however, there is Aviation Safety Regulations (the Safety Regulation) of February 2011 which governs the air safety. The Safety Regulation consists of three chapters which include passenger cabin safety, transport of dangerous goods by air, aviation accident and incident investigation.   The Aviation security affairs sector administer and provide safety to the aviation industry, and the sector consists of several departments as follows:
    • Air Navigation and Aerodrome (the ANA);
    • Airworthiness (the AW);
    • Flight Operations (the FOP);
    • Licensing (the LIC); and
    • Policy, Regulations, and Planning (the PRP).

    1.4   Is air safety regulated separately for commercial, cargo, and private carriers? Are air charters regulated separately for commercial, cargo and private carriers?

    Commercial aircrafts, as well as private aircrafts, e regulated pursuant to the Civil Aviation Regulations on Air Safety of February 2011, and the Civil Aviation Regulations on Transport of Dangerous Goods by Air of May 2015 regulates cargos.   Air charters for commercial, cargo, and private carriers are regulated under the Air Safety Regulation of February 2011.  

    1.5 Are airports state-owned or privately owned?

    All the major airports in each Emirate are owned by the government of the respective Emirate or the Department of Civil Aviation in that Emirate. However, there are several privately-owned airports in Abu Dhabi, such as: Al Futaysi Airport, owned by Hamad bin Hamdan Al Nahyan; Al Jazeirah Airport, owned by Al Jazeirah Aviation Club; Arzanan Airport, owned by the Zakum Development Company; and Buhasa Airport, owned by the Abu Dhabi Company for Onshore Oil Operations.  

    1.6   Do the airports impose requirements on carriers flying to and from the airports in your jurisdiction?

    UAE airports impose several charges on outbound and inbound airlines, as follows:
    • Passenger Service Charges (the PSC), which is to be paid by the outbound airline. Infants, aircraft operating crew and transit/ transfer passengers continuing travel within 24 hours are exempted from PSC.
    • Passenger Security and Safety Fee (the PSSF), payable on outbound airlines. Infants, aircraft operating crew and transit/transfer passengers continuing travel within 24 hours are exempted from PSSF.
    • Advance Passenger Information Fee (the API) for arriving passengers on inbound airlines. Infants, aircraft operating crew and transit passengers continuing travel within 12 hours are exempted from API.
    • Passenger Facility Charge (the PFC), which has recently been implemented and is payable by outbound airlines for departing passengers. Infants, operating crew and transit passengers with two flights on the same journey are exempted; however, transfer passengers are obliged to pay this charge.

    1.7    What legislative and/or regulatory regime applies to air accidents? For example, are there any particular rules, regulations, systems and procedures in place which need to be adhered to?

    Civil Aviation Regulation Part VI-Chapter 3 (the Air Accident Regulation) applies to air accident and incident  investigation(s).  The Air Accident Regulation governs commercial, private, leased and chartered aircraft. It further includes, but is not limited to, the procedure for investigation, objectives of the investigation,  powers of investigators, responsibilities of the GCAA, the roles of the investigating committee, investigations conducted by foreign states, besides other key provisions.   Procedure:
  • Any person having knowledge of an aircraft accident or incident should immediately notify the GCAA, and such notification should include all the details including, but not limited to: the manufacturer, model, nationality, registration mark and serial number of the aircraft; complete details of the owner; the date and time of the accident; complete details of the flight commander and cabin crew; the last point of departure; and the landing destination;
  • Upon the receipt of the information, the GCAA will request that the state of the operator, the state of the manufacturer and the state of design provide the complete details regarding the aircraft.
  • Thereafter, the GCAA will establish an Accident Investigation Committee to investigate the cause of such accident.  

    1.8   Have there been any recent cases of note or other notable developments in your jurisdiction involving air operators and/or airports?

    The Dubai Government is planning to increase the number of flights, and it is anticipated that it will handle 100 million passengers on a daily basis.

    Part 2 Aircraft Trading, Financing, and Leasing

     

    2.1    Does registration of ownership in the aircraft register constitute proof of ownership?

    The GCAA, after having approved the application, will register the aircraft, including complete details of the aircraft in the Certificate of Registration (COR), and will hand over the COR to the owner of the aircraft or his representative, which will constitute proof of ownership.

    2.2    Is there a register of aircraft mortgages and charges? Broadly speaking, what are the rules around the operation of this register?   There is no mortgage register in the UAE; however, the creditors financing the foreign aircraft must have the existence of any foreign- registered mortgage noted by the GCAA in its files.   The GCAA also has the authority to acknowledge irrevocable de-registration and export request authorization, registered under the Cape Town Convention in an international registry.   All the aircraft mortgages in the UAE are required to be registered in the Aircraft Register, along with the prior approval of the GCAA. Post the mortgage, the GCAA will issue a new Certificate of Registration, upon submission of following documents:
    • A certified copy of the certificate of a true commercial name of the entity, issued by the Commercial Registry of the state in which it was registered;
    • a certified copy of the Board Resolution;
    • a notarized confirmation letter signed by the entity's legal representative; and
    • the changed registration plate.

    2.3    Are there any particular regulatory requirements which a lessor or a financier needs to be aware of as regards aircraft operation?

    In accordance with Article 28 and 29 of the Civil Aviation Law, the GCAA has the authority to register the aircraft in the name of lessor, if he is a qualified person. The aircraft will remain registered for the duration of the lease agreement period, subject to provisions of the Civil Aviation Law.

    2.4    As a matter of local law, is there any concept of title annexation, whereby ownership or security interests in a single engine are at risk of automatic transfer or other prejudice when installed 'on-wing' on an aircraft owned by another party? If so, what are the conditions to such title annexation and can owners and financiers of engines take pre-emptive steps to mitigate the risks?

    The Civil Aviation Law is silent on the concept of title annexation wherein the ownership or security interests in a single engine are  at risk due to automatic transfer upon installation 'on-wing' on an aircraft.

    2.5    What (if any) are the tax implications in your jurisdiction for aircraft trading as regards a) value- added tax (VAT) and/or goods and services tax (GST), and b) documentary taxes such as stamp duty; and (to the extent applicable) do exemptions exist as regards non-domestic purchasers and sellers of aircraft and/or particular aircraft types or operations?

    Federal Decree Number 8 of 2017 concerning Value Added Tax (the VAT Law) is applicable to companies incorporated in the UAE. Therefore, companies are obliged to pay five (5) percent VAT on all goods and services; however, there are several exemptions for certain goods and services, within which a zero-tax rate will apply, such as the supply of means of transport by air used to transport passengers and goods, or the supply of aircraft specifically for assistance in rescue by air.

    2.6    Is your jurisdiction a signatory to the main international Conventions (Montreal, Geneva and Cape Town)?

    The following are the international Conventions signed by the UAE:
    • The Cape Town Convention on International Interests in Mobile Equipment signed on 2 April 2008.
    • The Convention for the Suppression of Unlawful Acts Against Safety of Civil Aviation (the Montreal Convention), signed on 23 September 1971.
    • The Chicago Convention.
    • The Convention on Offences and Certain Other Acts Committed on Board Aircraft (the Tokyo Convention), signed on 14 September 1963.
    • The Warsaw Convention for Unification of Certain Rules Relating to International Carriage by Air, signed in 1929.
    • The Convention on Suppression of Unlawful Seizure of Aircraft (the Hague Convention), signed on 16 December 1970.

    2.7    How are the Conventions applied in your jurisdiction?

    The UAE has ratified numerous international Conventions in relation to civil aviation, and have simultaneously given them legal status through the following statutes:
    • Federal Decree 95 of 1980 approving the state's Accession to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, signed at Montreal on 23 September 1971.
    • Federal Decree Number 8 of 1981 approving the state's accession to the Convention for the Suppression of Unlawful Seizure of Aircraft, signed at The Hague on 16 December 1970.
    • Federal Decree Number 9 of 1981 approving the state's accession to the Convention on Offences and Certain Other Acts Committed On Board Aircraft, signed at Tokyo on 14 September 1963.
    • Federal Decree Number 13 of 1986 concerning the state's accession to the Warsaw Convention for the Unification of Certain Rules relating to International Carriage by Air (1929).
    • Federal Decree Number 85 of 1986 concerning the state's membership of the World Meteorological Organization.
    • Federal Decree Number 79 of 1988 ratifying the state's accession to the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, supplementary to the Convention for Suppression of Unlawful Acts against the Safety of Civil Aviation.
    The GCAA ensures compliance with the aforementioned international treaties and Conventions to which the UAE is a party  

    Part 3 Litigation and Dispute Resolution

    3.1    What rights of detention are available in relation to aircraft and unpaid debts?

    There are no detention rights that exist with respect to unpaid fees or any air navigation fees. However, the GCAA can recover the amount by filing a civil action in a civil court against the owner, operator or lessee of the aircraft.

    3.2    Is there a regime of self-help available to a lessor or a financier of an aircraft if it needs to reacquire possession of the aircraft or enforce any of its rights under the lease/finance agreement?

    The UAE does not recognize the self-help regime; however, pursuant to the Civil Aviation Regulations and Civil Aviation Advisory Publication Number 58, the GCAA has framed a procedure for irrevocable De-Registration and Export Request Authorization (IDERA), under which an approval from the UAE courts is not required. An IDERA entered into by a lessor and financier allows them to initiate self-help proceedings.   However, with regard to leases of aircraft, there are, primarily, three types of leases available, as follows:
    • Wet Lease: Under a Wet Lease agreement, the company which is leasing out the aircraft is required to provide Aircraft, Crew, Maintenance, and Insurance (ACMI) to the lessee. The Wet Lease is for a short time span, and during that span, the lessor holds the AOC, whereas the lessee is obliged to pay other charges or fees such as airport fees, charges, and other duties. The lessee even has financial control over the aircraft operations.
    • Damp Lease:  In a Damp Lease, the lessor provides the aircraft, maintenance, and insurance, except the crew. Thus, it is the responsibility of the lessee to hire the crew.
    • Dry Lease: Under this arrangement, the lessor is only obliged to provide the aircraft; the rest is maintained by the lessee.
    This lease is for more than a year and can be extended up  to half the life of the aircraft. The lessee in this lease has to obtain its own AOC.   Civil Aviation Regulation Part I, including Definitions, also defines Dry Lease and Wet Lease as mentioned above.  

    3.3    Which courts are appropriate for aviation disputes? Does this depend on the value of the dispute? For example, is there a distinction in your country regarding the courts in which civil and criminal cases are brought?

    There are no specific courts assigned for resolving aviation disputes; UAE courts adjudicate aviation disputes in the country, depending upon the value of the dispute and the Emirate in which the aircraft is situated.   The UAE has signed and acceded to the Cape Town Protocol, which outlines that parties to an agreement, contract of sale, guarantee, and agreement may decide the law governing their disputes.  

    3.4   What service requirements apply to the service of court proceedings, and do these differ for domestic airlines/parties and non-domestic airlines/parties?

    Court proceedings in the UAE initiate by filing a claim in the relevant court along with the court fees. The claim is served on each defendant in the proceedings personally; however, if the court is unable to locate the defendant, investigations are carried out by several government authorities in the respective Emirate, and if this investigation is unsuccessful, the court orders that the service takes place by way of publication in the newspapers in both languages (Arabic and English). However, for parties residing outside the jurisdiction of the court or outside UAE territory, the court will permit the service of court proceedings directly to the other party residing outside the country.  

    3.5   What types of remedy are available from the courts or arbitral tribunals in your jurisdiction, both on: i) an interim basis, and ii) a final basis?

    The remedies available to the claimant generally depend on the nature and size of the dispute in addition to type of forum (arbitration (domestic or international), the DIFC., the ADGM by way of example) The remedies may be awarded as follows:   Interim basis
  • the preliminary injunction, to prevent the other party from doing something until the final judgment is passed; and
  • damages.
  • Final basis
  • damages;
  • orders to hold possession of the aircraft;
  • de-registration of an aircraft;
  • sale of an aircraft; and
  • final injunctions requiring one party to do something and
  • simultaneously prevent the other party from a certain act.
  • 3.6   Are there any rights of appeal to the courts from the decision of a court or arbitral tribunal and, if so, in what circumstances do these rights arise?

    Yes, parties to the dispute have the right to file an appeal in the relevant court against the decision of a lower court or of an arbitral tribunal.   Parties can file appeals in the Court of Appeal against the final decision passed by the Court of First Instance in relation to issues of law. However, the law imposes a time limitation on such appeals, which is of thirty (30) days, within which the appellant should file an appeal in the court.   The Decision passed by Arbitral Tribunal is binding upon the parties; however, there are certain cases in which the decision passed by the arbitral tribunal can be set aside by the Court of Appeal or other relevant courts, which are as follows:
    • invalidity of the arbitration agreement;
    • failure to adhere to the rules and regulations of arbitration proceedings;
    • the award passed by the tribunal is beyond the scope of
    • submission to arbitration;
    • the arbitral tribunal was not composed within the rules and procedures agreed between the parties; and
    • the dispute between the parties is not arbitrable in nature.

    Part 4 Commercial and Regulatory

    4.1    How does Dubai and the UAE approach and regulate joint ventures between airline competitors?

    Joint ventures between airlines are regulated by Federal Law Number 2 of 2015 concerning Commercial Companies. There are several types of joint ventures, such as a Limited Liability Company, Public Joint Stock Company, Private Joint Stock Company and Limited Partnership Company. The LLC is considered the most suitable option, due to its flexible management system. The main consideration in choosing a joint venture on the UAE mainland is the shareholding ratio, which is restricted to 49 percent for a foreign company.

    The company also has an option to opt for a free zone for establishing a joint venture. A free zone offers several advantages, such as the availability of 100 percent ownership in the venture.

    4.2    How do the competition authorities in your jurisdiction determine the 'relevant market' for the purposes of mergers and acquisitions?

    The competition authorities do not provide any clear guidance in order to explain what constitutes a "relevant market". However, Federal Law Number 4 of 2012 on Regulation of Competition (the Competition Law) defines a relevant market as a commodity, service, or a group or products or services which may be substituted, on the basis of its price, characteristics and uses, or whose alternatives may be chosen to meet customers' needs in any specific geographical area.

    However, the definition of the relevant market may vary according to the establishment's position in the market, economic consideration captured by the company, or any restrictive agreement signed by the parties.

    4.3   Does Dubai or UAE have a notification system whereby parties to an agreement can obtain regulatory clearance/anti-trust immunity from regulatory agencies?

    Yes, parties entering into a merger or capturing a significant economic consideration in the market are obliged to notify the Ministry of Economy (MOE) of the relevant Emirate. The notification must take place thirty (30) days prior to the signing of the merger agreement

     

    4.4  How do Dubai or UAE approach mergers, acquisition mergers, and full-function joint ventures?

     

     

    The Competition Law regulates mergers,  acquisition mergers, and full-function joint ventures. The Competition Law includes restrictions on anti-competitive practices and simultaneously imposes merger control measures. The Competition Law provides that the acquirer of a proposed economic concentration which has the potential to affect the relevant market is required to inform the Ministry of Economy thirty (30) days prior to the commercial transaction. Also, it is obligatory for the companies to inform the MOE if the market share of the parties exceeds forty (40) percent of the total transactions undertaken in the relevant market.

     

    4.5  Please provide details of the procedure, including time frames for clearance and any costs of notifications 

     

     

    The Competition Law provides that, in a proposed economic concentration which will have a severe impact on competition in the relevant market or will create a dominant position of the acquirer, the procedure through which the acquirer can seek clearance from the MOE is as follows:

    The acquirer should submit an application in order to seek pre-approval from the Competition Authority of the MOE thirty (30) days prior to the contract.

    Post receiving the application, the competition authority will undergo a substantive test.

    Through the substantive test, the competition authority will ascertain the effects of the merger in the relevant market and whether or not the merger will create a dominant position in the market. However, it is still unclear whether or not parties can proceed with signing the agreement without actually obtaining approval from the authority. There is no specific cost for notifying the authority regarding a merger.

     

    4.6  Are there any sector-specific rules which govern the aviation sector in relation to financial support for air operators and airports, including (without limitation) state aid?

    The GCAA does not specifically provide rules governing financial support for air operators and airports.

    However, the Dubai Government recently planned for an initial $3 billion financial deal in order to support Dubai International Airport and Al Maktoum International Airports. Financial support will be provided by a consortium of Dubai entities, including the State- owned Investment Corporation of Dubai, the Dubai Department of Finance, and the Dubai Aviation Corporation.

     

    4.7 & 4.8  Are state subsidies available in respect of particular routes? What criteria apply to obtaining these subsidies? What are the main regulatory instruments governing the acquisition, retentio and use of passenger data, and what rights do passengers have in respect of their data which is held by airlines?

    The UAE government does not provide any subsidies to aircraft with respect to particular routes.

    Federal Law Number 5 of 2012 on Combatting Cybercrimes (the Cybercrime Law) is the primary piece of legislation which governs the acquisition, retention, and use of passenger data.

    Passengers have the right to limit the information held by airlines or to make any changes to such information. The Cybercrime Law imposes severe penalties on the accused when actions result in the disclosure of personal information to the public.

    4.9 In the event of a data loss by a carrier, what obligations are there on the airline which has lost the data and are there any applicable sanctions?

    The Cybercrime Law does not specifically lay down obligations on the airlines in the event of loss of personal data; however, there is an obligation on the data controller to ensure that the data is processed properly and to take preventive measures against the unauthorized use or disclosure of personal data.

    4.10   What are the mechanisms available for the protection of intellectual property (e.g. trademarks) and other assets and data of a proprietary nature?

    The protection of intellectual property covers protection of trademarks, patents, copyright, geographical indications and industrial designs. The laws regulating intellectual property are:

  • Federal Law Number 31 of 2006 pertaining to Industrial Regulation
  • and Protection of Patents, Industrial Designs, and Drawings; 
  • Federal Law Number 7 of 2002 concerning Copyrights and Neighbouring Rights; and 
  • Federal Law Number 37 of 1992 on Trademarks as amended by Law Number 8 of 2002.
  • The aforementioned types of intellectual property can be protected by filing an application with the MOE, which undertakes a substantive test. Thereafter, upon satisfying itself of the validity of the documents submitted, the MOE issues the registration certificate to the owner of the intellectual property.

    4.11 to 4.13   Is there any legislation governing the denial of boarding rights? What powers do the relevant authorities have in relation to the late arrival and departure of flights? Are the airport authorities governed by particular legislation? If so, what obligations, broadly speaking, are imposed on the airport authorities?

    4.11 The GCAA does not have any specific regulations governing the denial of boarding rights; however, each major carrier in the UAE, such as Emirates, Etihad and Flydubai, has its own conditions for carriage and its own rules by which it may deny passengers their boarding rights.

    On a similar note, passengers denied boarding rights involuntarily are entitled to claim compensation.

    4.12 Under the Air Transport Regulations of 2007, the Department of Transport obliges the aircraft operators to establish minimum service quality standards, which include compensation for delayed flights.

    4.13 The authorities managing airports  in the  respective  Emirates are regulated by Federal Law Number 2 of 2015 on Commercial Companies (the Companies Law). For example, the Dubai Airports Company in the Emirate of Dubai is the airport authority regulating Dubai International Airport and Al Maktoum International Airport, under the Companies Law.

    4.14 to 4.17  To what extent does general consumer protection legislation apply to the relationship between the airport operator and the passenger? What global distribution suppliers (GDSs) operate in your jurisdiction? Are there any ownership requirements pertaining to GDSs operating in your jurisdiction?Is vertical integration permitted between air operators and airports (and, if so, under what conditions)?

    4.14  Federal Law Number 24 of 2006 on Consumer Protection does not specifically govern the relationship between the air operator and the passenger.

    4.15 The Major Global Distribution Suppliers in the UAE are Rakha Al- Khaleej International LLC and Global Distribution FZE.

    4.16  GDSs operating in the UAE can be in the form of Limited Liability Company, wherein fifty-one (51) percent of the shares are held by a UAE national.

    4.17 Yes, air operators or airports can enter into joint ventures or mergers, as mentioned in question 4.1.

     

    Part 5 In Future

    4.1    In your opinion, which pending legislative or regulatory changes (if any), or potential developments affecting the aviation industry more generally in your jurisdiction, are likely to feature or be worthy of attention in the next two years or so?

    In order to improve the safety of helicopters operating in the UAE, the GCAA issued Information Bulletin of 2017, on 8 February, which provides the guidance applicable to the Civil Aviation Advisory Publication (CAAP). The guidelines must be complied with from 1 January 2018 by the following operators:
    • CAAP 70 operators must ensure that they adhere to the physical specifications and register themselves with the GCAA, and should obtain a landing area certificate.
    • CAAP 71 operators are required to obtain a primary accountable organization approval from the GCAA.

     

     

    STA is an international law firm headquartered in the Emirate of Dubai, UAE with a multijurisdictional presence. STA offers a multifaceted and well-rounded approach to addressing the legal needs of corporate clients, banking institutions, national and multinational corporations. STA's team of lawyers in Dubai and across UAE, Middle East, Asia and Europe work alongside several groups of companies within the Oil and Gas, Maritime, Real Estate, Construction, Hospitality, Aviation and Healthcare sectors regionally and internationally.

     

    Originally Published in ICLG to Aviation Law 2018

     ]]>
    Sat, 02 Dec 2017 17:00:00 GMT
    <![CDATA[Employment Regime in the DIFC]]> Employment Regime in the DIFC

    "A diploma is a piece of paper that is used to acquire another piece of paper: an employment contract."

            Mokokoma Mokhonoana

    Time and again, our team of employment lawyers in Dubai have discussed the provisions of UAE Federal Law Number 8 of 1980 on Regulation of Labour Relations to shed light on the employee and employer relations in the dynamic business environment of the United Arab Emirates (the UAE). Numerous law firms and legal pundits furthered this charade in 2016 with the enforcement of certain amendments that aimed to restructure the employment relations in the country by providing more transparency and flexibility in a growing business economy within the UAE mainland. However, one of the most important factors that played a crucial role in the country's development was left untouched: employment in the free zones, since free zones get regulated by the employment laws that are enacted by their respective authorities. In this article, we have tried to cover this void by elucidating the employment provisions of one of the principal financial free zones of the region, the Dubai International Financial Centre (the DIFC). The fundamental assertion in this regard is whether the educational level of employees is taken into consideration while appointing an employee to a particular position in a company established in the DIFC. This article will look into the overview of the DIFC employment law, its effect on growth potential, and its comparison with UAE mainland employment law.

    The DIFC is one of the most thriving free zones in UAE, and it is expected to be triple in size over the next ten years. The international standard of employment law in DIFC attracts many foreign professionals to work in the financial free zone. For that reason and the enthusiasm of employees to work under a good employment regime with full protection is the composition of the real background behind the success of DIFC.

    DIFC is the most advanced free zone in UAE due to its dedicated enactments and regulations based on the financial sector. These laws include 26 laws and 17 regulations. The recent amendment of DIFC Law Number 4 of 2005 (the DIFC Employment Law) vides DIFC Law Number 3 of 2012 (the New Law) has brought forward substantial changes in the work-force regime of the DIFC. This employment law has facilitated in the success of the DIFC due to its conformance to international standards and increased the degree of employee protection. We summarize these changes below:

                         I.          General duties of employers to their employees

    An employer must ensure, as far as is reasonably practicable, the health, safety, and welfare at work of its all employees.

                        II.          Vacation Leave

    Article 27 of the Labour Law has stated that employers should give a paid vacation leave of minimum of twenty (20) days to employees employed for at least ninety (90) days. The calculation of this vacation leave will be on pro-rata basis and employees are not permitted to carry accrued vacation leaves of more than twenty (20) days for a maximum period of twelve (12) months.

                III.          Working Hours

    An employee's maximum working hours is forty-eight (48) hours for each week. However, an employee may work for longer hours if he has given written consent to his employer under Article 21.

                IV.          Employment contract

    According to Article 13 of the Employment Law, an employee has the right to a written employment contract at the commencement of his employment. The written agreement shall set out full particulars (including without limitation the name of the parties, date of commencement of work, employee's remuneration and all other terms and conditions) regarding the employment.

                V.          Maternity Leave and Pay

    Article 37 has stated that an employee shall be entitled to a minimum maternity leave of sixty-five (65) working days. However, maternity leave is also applicable to female employees who seek to adopt a child below three (3) months of age.

    Employer's Liability and Other Provisions

    Article 51(2) has explicitly stated that an employer is liable for any act of an employee done in the course of employment. DIFC employment law provides fair and efficient procedures for resolving disputes arising from the application and interpretation of the employment law. It promotes the fair treatment of employers and employees make the condition between an employer and employee gentle. It is evident that DIFC employment law is one of the main reasons for the improvement of DIFC as it provides the best relationship between an employer and an employee.

    The DIFC draft of the employment law primarily aims at achieving international standards in employment law. The changes brought about to meet this goal is a strategic move towards better standards and compatibility with the international standards as well. However, it is not yet clear whether it is adequately abiding by the rules of International Labour Organization (the ILO). The ILO established with the aim of developing international labor standards has from time to time assigned conventions agreed with its member states including UAE. The intent of taking every member states to such a measure is, so these rules provide protection from inhuman labor and provide protection to workers for their freedom of association, collective bargaining, and many other rights. Unfortunately, the practicality of the above is still doubtful in the DIFC. For example, there is no provision mandating or allowing the establishment of a workers union. Therefore, employees are not able to negotiate improved working conditions or the right of collective bargaining.

    Comparison with the Federal Labour Regime

    Also, another disadvantage with the Labour Law is the inexistence of a minimum wage rate. Compared to the United Kingdom, the USA and most countries with developed employment regulations that have established a minimum wage rate. But DIFC has failed to accomplish this significant issue just like the Federal Law Number 8 of 1980 (as amended) (the Federal Labour Law).

    Furthermore, The Labour Law does not provide any summary dismissal for termination of an employee without notice. According to their employment law, the employer is entitled to dismiss "immediately" for "cause" where the conduct of the employee warrants termination and where a reasonable employer would have terminated the employment under Article 59(A).

    However, both, the employees and employers have both benefited from the Labour Law. For example, companies have fourteen (14) days to pay all wages owed to an employee following the termination of employment. They are also only required to provide health insurance for their employees rather than cover for health and disability loss of income. The employment law also provides an advantage to employers with the ability to dismiss an employee who takes sick leave more than their entitled limit.

    On the other hand, employees have benefitted from being able to obtain a health insurance, entitlement for the end-of-service gratuity (for the employees who completed one year or more of continuous services) and maternity leave with antenatal care.

    Moreover, many employees are becoming scared or are found to be less motivated to work in Dubai mainland throughout the past few years due to the low level of benefits and protection provided for employees who are to be serving under the Federal Labour Law.

    Therefore, another crucial question arises as to why DIFC has its separate employment regulations. Apart from all the other differences between the Federal Labour Law and the (DIFC) Employment Law, the "Discrimination Provision" for employees has become the core difference and the highest concern. It is a well-known communal fact that salaries in UAE are computed based on individual's ethnicity and nationality. This situation is a direct breach of the discrimination right in working industry. According to Startford (2009), Dr. Zumfuli, a Human resources professor at Sharjah University, "There is a lot of discrimination of nationality and religion in the labor market, and this affects the contribution of those who suffer from this situation." It is vital to mention that the Federal Labour Law does not have any provision on discrimination, but compared to that Labour Law explicitly prohibits employers discriminating against employees.

    Importantly, DIFC employment law differentiates from UAE mainland employment law in few other elements as well. The distinction matter because workers have individual rights, such as advantage on sick leave and termination notice. Employers also have additional rights, such as the right on dismissal for misconduct and overtime work of an employee. DIFC law has another significant advantage compared to the Federal Labour Law. The (DIFC) Employment Law stipulates that employers must provide and maintain a workplace that is free from harassment, safe and without risk to employee's health. Further, an employer must not threaten, intimidate or coerce an employee because of a complaint or investigation. However, UAE employment law does not have any provision on harassment.

    Conclusion

    To conclude, the primary factor behind the rapid growth of Dubai as a whole country is the workers and investors who are behind the stage developing the country landmarks and businesses in both small and large scale. The Federal Labour Law was enacted at a time when the UAE was still emerging as the world leader in commerce and trade. The corporate and commerce-related laws in the UAE have transformed to another level with the rapid development. But Federal Labour Law still lacks in many aspects. This lacking has ultimately created a negative impression about the standards of Dubai working industry and employers, among the potential personnel who are willing to work in the future. Whereas in comparison to that people are more ready to work with DIFC; since the employees are more satisfied with the international standard of labor law, benefits and labor protection provided by DIFC. Also, DIFC has become the place that could offer them the best working environment and welfare within in UAE. This fact itself proves the rapid growth of DIFC thanks to its employment law regulations.

    ]]>
    Sat, 28 Oct 2017 00:00:00 GMT
    <![CDATA[Регистрация Компании в Свободной Экономической Зоне Абу Даби Глобал Маркет]]> Регистрация Компании в Свободной Экономической Зоне Абу Даби Глобал Маркет

    Влияние глобализации и устранение торговых барьеров считается экономическим преимуществом, объединяющим внутренние рынки мира под одной крышей. Однако, существует и противоположное мнение на эту тему. Некоторые финансовые эксперты утверждают, что это глобальное явление послужило источником нестабильности и конкуренции на внутренних рынках. Кроме того, они также утверждают, что выход международных игроков на внутренние рынки часто приводит к дисбалансу сил в местных секторах и отраслях экономики.

    Тем не менее, минимальные торговые ограничения и вмешательство государства все чаще становятся синонимом успеха организации. Это требование в равной степени относится и к современным финансовым центрам. Абу Даби Глобал Маркет (ADGM) в данный момент является самым заметным примером в этом отношении. Финансовая свободная экономическая зона стала ведущей в регионе из-за практического отсутствия торговых барьеров и отсутствия ограничений, налагаемых на материковые компании в Объединенных Арабских Эмиратах. Кроме того, применение международных методов корпоративного управления наряду с международными нормами и стандартами послужили катализатором этого процесса.

    Регистрация Юридического Лица в ADGM

    ADGM предлагает инвесторам превосходное местоположение и динамичную бизнес-среду для привлечения инвесторов мирового финансового сообщества.  Многонациональные корпорации обращаются к финансовой фризоне, чтобы установить свое присутствие в регионе; в то время, как новые инвесторы рассматривают это как возможность работать бок о бок с ведущими компаниями. Кроме того, законодательные акты и правовая структура свободной экономической зоны действуют как магнит для инвесторов, которые стремятся установить или расширить свой бизнес в регионе. ADGM также включает внутренние суды и органы по разрешению споров для избежания последствий Закона Шариата о гражданских и коммерческих спорах на территории фризоны. Свободная зона также предлагает множество решений в области недвижимости для решения вопросов самого высокого уровня различного типа организаций, зарегистрированных во фризоне. Офисные и торговые помещения индивидуальной планировки – это только начало длинного списка преимуществ в ADGM

    Обширный и отлаженный свод законов, который в значительной степени отражает Закон Великобритании о Компаниях 2006 года, но тщательно учитывает требования региона и местные правила. Интересная особенность "организация ограниченного применения", обеспечивающая минимальные требования к раскрытию информации, откроет двери для холдинговых структур, где инвесторы предпочитают защищать конфиденциальную информацию и коммерческую тайну, а также предпочитают иметь региональную холдинговую компанию.

    ADGM добилась существенного развития в сотрудничестве с первыми лицами как внутри страны, так и за рубежом. Взаимодействие с руководящими органами, включая Экономический Департамент Абу Даби, Центральный Банк ОАЭ, Управление Страхования, Управление по Ценным Бумагам и Сырью, Муниципалитет Абу Даби, Комиссия по Финансовым Услугам, установили ориентир.

    ADGM является ключевым пунктом назначения для инвесторов, которые хотят вести финансовую деятельность в Абу Даби. Специальный регулирующий орган по финансовым услугам FSRA регулирует лицензирование всех субъектов, ведущих свою деятельность в финансовом секторе и желающих установить свое присутствие во фризоне. FSRA постаралась предоставить инвесторам многочисленные преимущества, приняв международные стандарты, используемые в международных финансовых центрах Гонконга, Лондона и Сингапура. Итак, финансовый сектор, основанный на риске, будет управляться FSRA при осуществлении различных видов деятельности, таких как банковское дело, хедж-фонды, управление активами и другие финансовые услуги.

    Итак, инвесторы ADGM могут зарегистрировать одну из следующих типов компаний для ведения деятельности в свободной экономической зоне:

     

    Типы компаний

    Детали

    Общество с ограниченной ответственностью участников

    •     Минимум 2 директора (Минимум 1 должен являться физическим лицом);
    •     Минимум 1 секретарь.

    Общество с ограниченной ответственностью участников (Ограниченное гарантиями партнеров, Неограниченное с долями партнеров, Неограниченное без долей партнеров, Ограниченного применения, Защищенная составная компания и Объединенная составная компания)

    •     Минимум 2 директора;
    •     Секретарь не обязателен.

    Филиал (компании, расположенной не в ADGM)

    Подходит для установления присутствия или представительского офиса.

    Партнерства (Генеральное Партнерство, Ограниченное Партнерство и Партнерство Ограниченной Ответственности)

    *Зависит от типа партнерства

    Филиал (Генерального Партнерства, расположенного не в ADGM, Ограниченного Партнерства,  расположенного не в ADGM & Партнерства Ограниченной Ответственности) 

    *Зависит от модели партнерства

     

    Заявители, желающие  открыть компанию в ADGM, должны подать заявку (онлайн) вместе со следующими документами для ускорения процесса подачи:

    •                     Копия паспорта, визовая страница или иммиграционный штамп о въезде в страну, удостоверение личности Emirates ID директора (-ов), уполномоченного лица, секретаря и акционера (-ов);
    •                     Заявление на бронирование предполагаемого имени компании;
    •                     Бизнес-план компании;
    •                     Отчет о капитале и первоначальный пакет акций (для компаний, ограниченных уставным капиталом);
    •                     Заявление о гарантии (для компаний, ограниченных гарантией);
    •                  Заявление предполагаемых должностных лиц организации;
    •                  Документ о резервировании товарного знака;
    •                 Заявление с предполагаемым адресом компании;
    •                  Копия Устава компании;
    •                 Копия решения Совета Директоров;
    •                  Копия договора аренды офисного помещения;
    •                  Подтверждение ограниченной сферы деятельности компании;
    •                  Заполненная и подписанная форма защиты данных  (DP-01);
    •                   Надлежащим образом заполненная и подписанная форма бенефициара или конечного владельца (BO-01), и
    •                  Любые другие документы, которые могут потребоваться руководством в зависимости от сферы деятельности компании.

     

    Однако, компаниям, которые хотят вести финансовую деятельность во фризоне, может понадобиться пройти строгий процесс регистрации, так как FSRA будет рассматривать их заявки. Соответствующий орган (FSRA для финансовых услуг и Орган Регистрации ADGM для нефинансовых услуг и продаж) выдаст лицензию после того, как заявка будет подана и рассмотрена. Впоследствии заявитель должен будет обратиться за учетной записью в FAWRI (онлайн система подачи заявок) и иммиграционной картой для подачи на визы для инвесторов и сотрудников, которые будут работать в компании.

    Регистрация компании в  ADGM может быть сложным процессом (особенно для юридических лиц, осуществляющих финансовую деятельность) с обширной документацией и процедурами соблюдения. Инвесторам рекомендуется воспользоваться услугами юридической фирмы, предоставляющей консультации по открытию компаний в ADGM, которая поможет решить вопросы с документацией и длительными процедурами регулирования, установленными фризоной для соответствия международным корпоративным нормам. 

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    Fri, 28 Jul 2017 05:00:00 GMT
    <![CDATA[FIDIC и ENAA: тщательное сравнение]]> FIDIC AND ENAA COMPARISION

    In the complex and technical world of construction and large manufacturing projects, the contracts and negotiations on the terms of an agreement between the parties are a means to keep the complex relation of parties within the bounds of clear understanding by utilizing a standard form of contract. The industry has seen the development of a various standard form of contract including, FIDIC (Fédération Internationale des Ingénieurs-Conseils), JCT (Joint Contracts Tribunal), ENAA (Engineering Advancement Association of Japan), ICE (Institution of Civil Engineers), etc. This list is not exhaustive but only indicative as there are numerous standard forms. We will discuss the standard form of contract produced by FIDIC and ENAA.  

    The FIDIC standard form of contract is internationally recognized and a utilized form of contract. FIDIC, established in 1913 by three countries namely Belgium, France, and Switzerland presently covers 97 countries as its member and has created forms of contract which are used extensively throughout the world. ENAA is a non-profit organization established in 1978 with the support of the Ministry of International Trade & Industry of Japan. Members of ENAA consist of 217 Companies (as of April 2016). The aims of the above organizations, in general, are to achieve inclusive, dynamic and sustainable development while having a voice for engineering professionals and, among other things, provide integrated assistance. 

    FORMS OF CONTRACTS

    FIDIC

    FIDIC has the best-known standard contracts which are as follows:

    • The Contract for Works of Civil Engineering Construction (Red Book, 1987 First Edition, revised in 1999).
    • Conditions of Contract for Electrical and (for) Mechanical Works including Erection on Site (Yellow Book, 1987 First Edition, revised in 1999).
    • Conditions of Contract for Design-Build and Turnkey (Orange Book, 1995).
    • Conditions of Contract for EPC Turnkey Projects (Silver Book, 1999 First Edition).
    • Conditions for Design, Build and Operate contracts (Gold Book, 2007).
    • Conditions of Contract for Plant and Design-Build (Yellow book, 1999 First Edition).
    • Conditions of Contract for i) Design, ii) Build and iii) Operate (the DBO) Projects (DBO Contract, 2008 First Edition).

    Other FIDIC contracts which are less known are the Turquoise Book for Dredging and Reclamation Works (January 2006), and also, the White Book Model Services Agreement (October 2006)

    ENAA

    ENAA also has model forms which are increasingly used by the industry recently in the past 12 years. The forms are as follows:

    §  International Contract for Process Plant Construction (1986 – First Edition, revised in 1992 and 2010)

    §  International Contract for Power Plant Construction (Turnkey Lump-sum Basis) (1996 – Second Edition, revised in 2012)

    §  International Contract for Engineering, Procurement and Supply for Plant Construction (EPS type contract) (2007 Edition, revised in 2013) 

    General Comparisons

    The content structure of the FIDIC forms of contracts often consists of general conditions, forms of tender and contract agreement, guidance for the preparation of the particular conditions, and dispute adjudication agreements. The ENAA model forms' in its latest Process Model Form – 2010 edition consists of a form of contract, general conditions, and guide notes. Wherein Volume 2 includes a sample of an appendix, Volume 4 consist of work procedures and Volume 5 consists of the general conditions and the form of agreement (an alternative form of industrial plant – without process license). The Power Model Form - 2012 edition consists of a form of agreement, and general conditions and Volume 2 provides a sample of appendices to the agreement.

    Although the FIDIC forms seem to be very well drafted "by the engineers for the engineers," is seemingly balanced, have many provisions, and are very extensive, they bring out the fact that legal layman draft such contracts. ENAA is written well with clear, precise, and short wordings. For the purpose of this article, with consideration to its possible limitations, we shall be comparing between FIDIC's Yellow (Conditions of Contract for Plant and Design-Build, 1999 – First Edition) and ENAA's Power Plant Construction Form – 2012.  However, there can be references in general to other forms, when stated otherwise. Where the Yellow book is for Plant and Design Build, ENAA's Power Plant construction model form is a turnkey form for BOT (build-operate-transfer) projects.

    Data Accuracy Obligations

    In the yellow and silver book under Sub-Clause 4.10 Site Data, there seem to be no obligations on an employer regarding an error in data provided by him. However, the responsibility for proper interpretation of information is put on the contractor as below text interprets:

     "The Contractor shall be responsible for (and) interpreting all such data."

    Further, it states:

    "To the extent which was practicable (taking into account the cost and time), the Contractor shall be deemed to have obtained all (relevant; and) necessary information as to (inherent) risks, the contingencies and (all) the other circumstances which may influence or affect the Tender or Works. To the same extent, the Contractor shall be deemed to have inspected and examined the Site, its surroundings, the above data and other available information, and to have been satisfied before submitting the Tender as to all relevant matters,…."

    The above words clearly indicate that the responsibility is put on the contractor as the contractor is responsible for obtaining necessary information. Which includes but is not limited to the form and nature of the site, including the hydrological and climatic conditions, subsurface conditions, and the extent and nature of the work and goods that are necessary for executing and completing the works for remedying of any defects. Though the provision states that when "taking account of cost and time" it becomes highly difficult to determine such factors of time and "practicability." Thereby rendering the provisions uncertain without laying down a clear responsibility on the employer for any information provided. Thus, the above clause and in fact the entire yellow book does not foresee any obligation on an employer for inaccurate information and even fails to place responsibility on an employer for correct information.

    Whereas the ENAA provisions under General Conditions 10.1 states that:

    "The Owner(s) shall ensure (at all times) the correctness and exactitude of (each and;) all information and or data to be (provided; or) supplied by the Owner(s) as described in Appendix 9-3 (Scope of Works and Supply by the Owner(s)) except when otherwise expressly stated in the Contract,"

    As such it is clear that the ENAA form makes it the responsibility of an employer/owner to provide correct data before and during the contract.

    Accordingly, the contractor bears a heavy burden of not only accessing accurate data provided by the employer but also bears the responsibility for any physical condition[1]{C}{C}{C}{C} Under the definition of unforeseeable{C}{C}{C}{C}[2]When this occurs, foreseeability will depend again on examination by the contractor.

    Employer's Requirements

    As per Sub-Clause 1.9, an experienced contractor should give notice to the Engineer who will be entitled to the terms of Sub-Clause 20.1 [Contractor's Claims] when the contractor fails to discover errors in an employer's requirements. These errors would get overlooked while exercising due care and scrutiny of the Employer's Requirements under Sub-Clause 5.1 [General Design Obligations]. 

    Further, "the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) whether and (if so) to what extent the error could not reasonably have been so discovered."  

    The yellow book or other such forms having similar provisions place a heavy burden on the contractor to review the employer's requirements at the tender stage. Further, as per every variation[3]Bearing in mind that from time to time to examine the employer's requirements before providing a tender and examinations without emphasizing on the obligation of an employer for such errors or on the engineer while evaluating the requirements issued by the employer.  It is pertinent to note that providing the employer's need is a factor in the control of employer which is published as per his ideas and concept of the project along with all technical and quality consideration which must also be a proper valuation of the contract price. Therefore, it is the employer who must retain responsibility for the definition and description of the works. Failing such demarcation and allocation of liability creates doubts as to the practical implementation of such provisions. 

    The above provision of Sub-Clause 1.9 further seems contrary to clause 5.4 which states as:

    "5.4 Technical Standards and the Regulations: The design, the Contractor's (each and all) Documents, the execution and the completed Works shall (in totality) comply with the Country's technical standards, the building, construction and (also;) environmental Laws, Laws applicable to the product being produced from the Works, and other standards specified in the Employer's Requirements, applicable to the Works, or defined by the applicable Laws."

    The above states that the design and contractor's documents must be in accordance with employer's requirement. However, the responsibility of errors in employer's requirement is not enforceable or even actionable against the employer under this form of contract. Further, only if it is determined to be undiscoverable by the engineer the contractor will be entitled to cost and extension of time.

    The ENAA model form under General Conditions Sub-Clause 27.3 - Defect Liability states:

    "The Contractor's obligations under this GC 27 shall not apply to ..........................(3) any designs, specifications or other data designed, supplied or specified by or on behalf of the Owner, or any matters for which the Contractor has disclaimed responsibility hereunder ."

    The above clause excludes the liability of the contractor on design discrepancies, errors or omissions if such erroneous specification, drawing or such technical documents are prepared due to inaccurate information provided by or on behalf of the employer. The ENAA form also provides that the contractor shall make reasonable site examination and other data, however, puts the obligation on the employer for inaccuracy. This clause in is accordance with the principle of the risk of liability being placed on the party who can control such risk.

    Part II of this two series article will discuss Design obligations, force majeure, and other relevant provisions. 

    [1] Sub-Clause 4.12 provides. For example, "physical conditions" means natural physical conditions and those that are man-made. Further, other pollutants and physical obstructions which the Contractor may encounter at the Site while executing the Works. These include sub-surface and hydrological conditions but exclude weather.

    [2] in sub-clause 1.1.6.8 climatic conditions are not included. "Unforeseeable" is defined as unreasonably foreseeable by an experienced Contractor on the date of submission of the Tender.

    [3], 1.1.6.9 "Variation" means changes to the Employer's Requirements or the Works, which are instructed or approved as a Variation under Clause 13 [Variations and Adjustments].

     

     

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    Fri, 14 Jul 2017 06:00:00 GMT
    <![CDATA[The Prenup to Every Merger and Acquisition]]>  

    The word 'efficiency' may not mean much for those of you who were absent during economics class in school. It is a term around which the whole concept of economic studies in based. Investopedia[i] defines 'efficiency' as the allocation of resources in an optimal manner to serve a company or an individual in the best method by reducing waste. It is the concept of getting work done with the least amount of resources. But that comes at a cost. Many a time, companies try to reduce their costs and maximize profits by employing cheaper materials and inefficient human resources. Companies also try to maintain or increase the level or standard of their output by pooling their resources. While the former is one of the least preferred methods to obtain efficiency, the latter has gained popularity due to the enhancement of corporate structures and growing consumer demands. But efficiency is a million-dollar word.

    A similar story lies behind one of the largest mergers in history between Henry J. Heinz Company and Kraft Foods Group, Incorporation. This merger created one of the major players in the food and beverages industry. Ergo, companies should review every aspect, factor and underlying right(s) of all the parties before initiating a merger or restructuring a corporate structure. The structure and type of merger may primarily depend upon the industry and the size of the companies. For example, when the investor limits the transaction to the assets of another company; such an acquisition is an asset purchase. However, when the investors are interested in buying the shares of the other company, the structure of the merger should be remolded to that of a share acquisition. Hence, it is evident that the structure and type of merger or acquisition are decided upon after considering and understanding the factors involved, the extent of assets and liabilities of the companies and the jurisdiction of the parties. Therefore, the benefit of opting for a particular structure or type of merger may be detrimental to the other party. Therefore, this article seeks to draw a line between an asset sale and share purchase and explain about the advantages and disadvantages of both these structures from the purview of private companies in the United Arab Emirates (UAE).

    Status quo in the UAE

    The principles of contracts govern the mergers and acquisitions in the UAE. The primary piece of legislation that has laid down the provisions regarding the matter is Federal Law Number (2) of 2015 on Commercial Companies (the Companies Law). Article 22 of the Companies Law has stated that a UAE national should hold at least fifty-one (51%) shares of an onshore company in the UAE should be and branch offices of foreign entities in the UAE may appoint a local agent to conduct trade in the UAE. Therefore, transfer of shares in companies established in the UAE should adhere to this restriction on foreign ownership.

    Transaction structures for private companies

    As mentioned earlier, investors have the option of either acquiring the shares of the company (a share acquisition) or the assets of that company (an asset acquisition). The investors should conduct due diligence and agree on one of the two (2) structures depending on the factors discussed below:

    Share Sale

    In the case of a share sale, once an investor has purchased all the shares of a particular company, all the assets and liabilities of that company (known or otherwise) will be transferred to the acquirer. Therefore, the status of the target company is not affected by a share sale; however, with a new owner and the seller of the shares will lose his nexus with the entity. It is pertinent for the buyers to conduct extensive due diligence process by employing a law firm that provides bespoke legal advice before purchasing the shares of a company since the investors will assume all the obligations of the business entity. Therefore, the buyer should also negotiate the indemnity, insurance, and warranty of the exact liabilities to mitigate any issues that may arise. However, these solutions are not comprehensive since they may face problems in enforcement since their value depends on the creditworthiness of the seller. Further, an indemnity clause may also be restricted from full enforcement since it is likely to constitute unjust enrichment - prohibited by Sharia Law. Therefore, the injured party can only enforce indemnity to the extent of loss that they have suffered. Minority shareholders will be left when a buyer cannot acquire hundred percent (100%) shares in a company.

    The buyer and seller have to comply with all the restrictions on pre-emptive rights provisions in the company's constitution or the shareholders' agreement.

    However, share sale also has substantial advantages since the investors do not have to purchase every asset of the company individually. The objective of purchasing the assets is indirectly covered in the transfer of shares. This means that the investor acquires all the contracts and other third-party obligations also. However, the buyers should review change-of-control and termination clauses and may also have to obtain the approval or consent of the third parties before those contracts can be executed. Therefore, the investors should ensure that the seller provides all requisite approvals from all third-parties including regulatory approvals before the completion of the transaction. Specifically, the investors should make sure that the DED (Department of Economic Development) of the respective Emirate approves the transfer of shares and issues an amended license with the new ownership status. The target company may not be permitted to conduct its activities in the UAE without a valid license.

    Asset sale

    On the other hand, the investor will only acquire the specific assets and liabilities that are identified. This provides investors with a higher degree of certainty since the investors and handpicks the exact assets and liabilities that they want to acquire. However, buying some assets may also mean acquiring certain liabilities. For example, the investor may be liable for any environmental problem in the real estate property. When the property purchased by the investors are a part of another contract, then the buyer will also be liable for the provisions under those contracts from the date of transfer. However, unidentified assets and liabilities are not transferred to the investors.

    This method is considerably more ambiguous and complicated than share sale since every asset has to be transferred individually by delivery (for a moveable property) or by transfer of title (for real estate). Therefore, the investor should acquire every property and machinery owned by the target company. The ownership of the seller (i.e. the shares in the company) does not change at the completion of an asset sale. These shareholders will continue to be the legal owners of the company since they hold the shares. Further, if an investor who wishes to obtain the benefit of a license or contract; they will need that particular right to be transferred separately. It is pertinent for investors to note that commercial contracts generally contain a clause that restricts the right of the parties to assign the contract to any third-party. Therefore, the investor should explicitly make sure that the seller obtains all approvals required when there is a provision that restricts the novation or assignment of a particular document without the approval of the other party. Federal Law Number 18 of 1993 issuing the Commercial Transactions Law has mentioned the procedures and conditions that the parties should adhere to while transferring a company's property. Article 42 of this law has stated that any action that may deal with the transfer of ownership of a company's property should be attested and authenticated by the Notary Public and should also be registered in the Commercial Registry. Further, Article 45 (1) has also stated that the investor must publish a summary of the contract of sale in two (2) daily Arabic newspapers (between an interval of one week) with the view of providing creditors of the target company to put forward any objections or claims against such sale.

    Miscellaneous

    Transfer tax is not applicable on transfer of the share of companies in the UAE. However, a transfer fee of four percent (4%) shall apply to the transfer of shares of a company established in the UAE. Further, a transfer tax ranging from 1% to 4% is charged on the assignment of real estate right by the Policy Sale Services at the Dubai Land Department. The rate may vary with the nature of the property interest and the particular Emirate.

    On the other hand, in share sales, the employees of the target company will continue to work under the business, and the change in ownership will not change the employment relationship between the employees and the company itself. Although, this general rule does not apply to foreign employees. Federal Law Number 8 of 1980, as amended and Ministerial Order Number 13 of 1991 (collectively, the Labour Law), a foreign employee's sponsorship cannot be transferred to a new employer. However, the buyer may draft new employment contracts for foreign employees of the target company, in the prescribed forms of the Ministry of Immigration and Labor. In an asset sale, the employees of a company cannot be transferred automatically. Although, the investors have the option of revoking the present employment contracts and registering new employment contracts under the new entity. Ergo, companies have to make sure that their transactional structures are most suitable after considering all the factors to safeguard the rights of the parties.


    [i] http://www.investopedia.com/terms/e/economic_efficiency.asp

     

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    Thu, 29 Jun 2017 14:00:00 GMT
    <![CDATA[Открытие Компании в Свободной Зоне JAFZA ]]> Открытие Компании в Свободной Зоне JAFZA 

    Строительство Триумфальной арки в Париже заняло почти тридцать лет до ее открытия французским королем Луи-Филиппом в 1836 году. Сколько времени, на ваш взгляд, потребуется, чтобы построить столичный город, который может похвастаться международными инвесторами в сердце пустынных бесплодных земель? Дубай, несомненно, достиг своей вершины и стал мишенью глобальных наблюдателей, привлекая в регион инвесторов со всего мира. Дубай предложил им инфраструктуру мирового уровня, нулевое налогообложение, легкие соединения с крупными портами по всему миру, современную автомобильную, железнодорожную и воздушную сеть и право владеть 100-процентными долями в свободных зонах! Одна из первых свободных зон ОАЭ - свободная зона Джебель Али (JAFZA) получила огромный успех, благодаря тщательному и детальному планированию, четкой процедуре согласования правил, поэтому эта современная свободная зона продолжает привлекать миллионы инвесторов каждый месяц, интересующихся открытием компании  в JAFZA. JAFZA была создана почти два десятилетия назад и сегодня является крупнейшей в мире свободной зоной..

    Будучи крупнейшей, эта зона становится намного более развитой в отношении разнообразия предложений. По этой причине свободная зона сегодня является домом для международных фирм Fortune 200, быстрорастущей индустрии потребительских товаров, предприятий по производству и послепродажному обслуживанию, а также сервис-ориентированных фирм. Оформленное законодательство и правила, стратегическое расположение, максимально возможный доступ к морским портам, доступность земельных и других ресурсов, а также близость к новому международному аэропорту Аль-Мактум являются неопоримыми достоинствами. У JAFZA было четкое видение роста, и руководство внесло своевременные изменения в свои правила, рассматривая сегрегацию земельных участков, выделяя определенные участки земли под соответствующие виды деятельности, определяя пакеты лицензионных платежей, предоставление готовых складов, включая жилье для работников, наличие холодильных камер, расширенную и полную безопасность.   

    Практически нет бизнес-сегмента, в котором JAFZA не предлагает свои услуги. JAFZA является домом для ведущих мировых фармацевтических фирм, исследовательских и опытно-конструкторских фирм, импортеров и экспортеров овощей, фруктов и скоропортящихся продуктов, компаний электронной коммерции и IТ, компаний, занимающихся торговлей в целом, поставщиков стали и глобальных конгломератов. Инвесторы могут выбрать форму общества с ограниченной ответственностью, форму предприятия в свободной экономической зоне, промышленную или национально-промышленную лицензию в дополнение к лицензии на обслуживание.

    JAFZA всегда привлекала (и продолжает привлекать) инвесторов практически из любой части мира. Являясь самой большой свободной зоной в Дубае, JAFZA имеет миллион заявок, желающих стать частью сообщества. Посетители должны подать заявку на получение бесплатного пропуска в ворота Jebel Ali Free Zone Gate Pass. JAFZA также предлагает готовые к использованию офисы, где инвесторы могут начать свою деятельность без хлопот по приобретению своей мебели, оборудования и приспособлений. JAFZA также предоставляет жилые помещения, трудовые лагеря для рабочих, холодильные камеры и земли. Посетите нашу страницу, чтобы узнать больше об открытии бизнеса в JAFZA, стоимости открытия, ценах на землю, стоимости склада и связанных с ними характеристик. Действительно, можно с уверенностью предположить, что весь этот блеск, по сути, является золотом, когда речь идет об инвестиционном климате, который предлагается в Дубае и Объединенных Арабских Эмиратах.

    JAFZA служит региональной операционной базой для многочисленных компаний, использующих промышленные возможности и коммерческие рынки ближневосточного региона. JAFZA предоставила международным организациям и местным инвесторам легкий доступ к региону с высококачественной инфраструктурой и благоприятной для инвесторов деловой средой. Власти свободной зоны Джебель Али создали прозрачный процесс открытия компании для уменьшения требований к документации, к юридическим формальностям, чтобы инвесторы могли начать свою деятельность в кратчайшие сроки. Ho тем не менее, инвесторам рекомендуется понимать конкретную категорию бизнеса и лицензию, которая соответствует их бизнес требованиям, прежде чем начинать процедуру открытия компании. В приведенной ниже таблице были изложены некоторые процедурные и юридические аспекты открытия компании в JAFZA для обеспечения четкого понимания правил и положений свободной зоны:

    Данные

    Детали

    Различные типы юридических лиц

           i.             FZCO – компания свободной зоны с числом акционеров от 2 до 50;

     II. FZE - компания свободной зоны с единственным акционером;

    II. PLC – компания, зарегистрированная на фондовой бирже, с числом акционеров от 2 до 50; а также

        ii.             Филиал компании, назходящейся за пределами свободной зоны.

    Различные лицензии

    Торговая лицензия, лицензия на обслуживание, промышленная лицензия, национальная промышленная лицензия, лицензия на электронную коммерцию, лицензия на инновации и оффшорную регистрацию.

    Почему именно JAFZA?

    Идеальное расположение свободной зоны, конкретные лицензии и динамично расширяющийся внутренний рынок свободной зоны, специализированный рынок трейдеров и современная инфраструктура.

    Кто должен выбрать JAFZA?

    Разнообразие компаний в JAFZA является одним из ее главных преимуществ. JAFZA располагает компаниями из различных секторов, таких как легкая промышленность, поставщики услуг и предприятия сельскохозяйственного сектора. Кроме того, свободная зона является основным выбором для инвесторов, которые намерены проводить импорто-экспортные операции.

    Другие варианты, доступные инвесторам

    DAFZA (или свободная зона аэропорта Дубая) предоставляет инвесторам аналогичные услуги и виды бизнеса. Расположение DAFZA рядом с Международным аэропортом Дубая предоставило авиационным и импортно-экспортным компаниям прямой доступ к глобальным воздушным маршрутам. JAFZA стала ведущей свободной зоной, благодаря своей современной инфраструктуре и разнообразным вариантам лицензирования.

     

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    Mon, 26 Jun 2017 06:00:00 GMT
    <![CDATA[Претензии к Грузоперевозкам в ОАЭ ]]> Претензии к Грузоперевозкам в ОАЭ 

    "Хороший моряк выдержит шторм, которого ему не избежать, и избежит шторма, которого ему не выдержать."

    Претензии к грузоперевозкам являются важными коммерческими правами.  Поскольку вся цель торговли морским транспортом заключается в доставке грузов из пункта A в пункт B, тем самым способствуя международной торговле и развивающимся экономикам мира, мы хотели бы подчеркнуть юридические требования к грузам в Объединенных Арабских Эмиратах (ОАЭ).

    Многие руководящие органы по всему миру приняли морское законодательство включающее в себя набор правил, касающихся перевозки грузов, известные как "Гаагско-Висбийские правила". Привнося форму единообразия, эти различные законодательные акты обеспечивают аналогичную защиту грузов перевозчикам. Следуя этому примеру, интересно отметить, что, хотя Объединенные Арабские Эмираты не являются сторонниками или участниками Гаагско-Висбийских правил, в Федеральном законе № 26 1981 года содержатся положения, отражающие аналогичные концепции. Как исключения из ответственности, так и необходимость проявлять должную осмотрительность, предусмотренные законом ОАЭ, отражаются  в  статье IV Гаагско-Висбийских правил

    В договоре грузоперевозки перевозчик соглашается перевезти груз из пункта А в пункт В, и грузоотправитель по договору соглашается уплатить перевозчику за обслуживание. Грузовая накладная, которая выдается перевозчиком или его агентом грузоотправителю, устанавливает правила морской перевозки. Как правило, грузоотправитель отправляет оригинал накладной грузополучателю, то есть покупателю груза. Получатель представляет оригинал перевозчику в порту разгрузки, который в свою очередь выдает заказ на доставку, чтобы получатель мог собрать груз из порта. Претензии по грузу возникают, когда существует нарушение договора перевозки.

    Регулирующие законы

    В соответствии с Морским Коммерческим Законодательством ОАЭ [i] (MCL) грузовая накладная (BOL) считается действительным доказательством договора перевозки. Статья 278 предусматривает, что любое условие в накладной, которое пытается освободить или уменьшить ответственность перевозчика за утрату или повреждение вопреки MCL, является недействительным. MCL обеспечивает ответственность перевозчика, заявляя, что перевозчик не должен возражать против условий BOL в отношении грузополучателя, который является непричастной третьей стороной в отношениях отправителя и перевозчика.

    Время отклонения претензии

    Статья 365 (1) предусматривает общую временную шкалу в два года с даты прибытия судна в порт завершения рейса. Претензии в отношении договора перевозки ограничены сроком в один год с даты, когда товары были или должны были быть доставлены. Передача товаров через портовые ворота - это дата, в которую товары считаются доставленными, и учитывается время, с данного момента и пока требование не будет официально подано в суд ОАЭ. Далее в статье 365 (2) говорится : "В дополнение к любым другим причинам, по которым срок исковой давности может быть прерван по закону, указанный срок истекает после назначения эксперта по установлению претензии, и в этом случае новый период будет действовать на тот же период с даты подписания расчета по установлению диспаши или с даты прекращения обязанностей эксперта диспаши". MCL предоставляет различные временные барьеры для других видов судоходной деятельности, например, два года для претензий по проводке судов и буксировке (статьи 314 и 317).

    Ответственность Перевозчика и Исключения в Законе ОАЭ

    Статья 275 предусматривает обстоятельства, при которых перевозчик несет ответственность или освобождается от ответственности за ущерб, причиненный во время доставки в порт разгрузки. Существует общая презумпция того, что перевозчик будет нести ответственность за ущерб, за исключением предусмотренных случаев.

    Ошибка или Упущение Грузоотправителя

    В соответствии со статьей 275 (1) суды ОАЭ обычно освобождают перевозчика от ответственности, которая является следствием ошибки и бездействия грузоотправителя или третьей стороны по договору. Обычно такие условия, как « Загрузка, складирование и содержание» содержатся в BOL для защиты перевозчиков. Такие положения  указываются при наличии грузов в контейнерах, и перевозчик не имеет отношение к упаковочной составляющей товаров, подлежащих перевозке. Обычно суды ОАЭ не полагаются на такие статьи, тем самым удерживая с перевозчика за ущерб, нанесенный товару, который был передан перевозчику, даже если печать была нетронутой, если BOL был выдан перевозчиком, который гарантирует, что товары в контейнерах соответствуют описанию, указанному в BOL. Тем не менее, суды ОАЭ рассмотрят факты причинения ущерба в результате упаковки и загрузки, когда перевозчик успешно доказал, что они были выполнены грузоотправителем по договору, и оказались  дефектными, в следствии чего грузоотправитель может быть привлечен к ответственности за ущерб в соответствии со статьей 275 (1) (n). Это также соответствует статье 259, которая предусматривает экспресс-упоминание статей о BOL. Поэтому, если у перевозчика есть разумные основания полагать, что погруженные товары не соответствуют описанию, предоставленному грузоотправителем по договору, перевозчик должен прямо указать пункт в BOL, предоставляя его оговорки и причины.

    Форс-мажор или Стихийное Бедствие

    Другие обстоятельства, при которых перевозчик не может считаться ответственным, являются форс-мажорными обстоятельствами в соответствии с положениями статьи 275 (1) (d) и (e). Если мероприятие предвидимо или предотвратимо, перевозчик обязан проявлять должную осторожность и меры предосторожности в предотвращении ущерба. Бремя доказывания лежит на перевозчике для подтверждения утверждений, указанных выше, и предоставления доказательств относительно его местоположения во время любых опасных погодных условий.

    Ограничение Ответственности

    Существует несколько положений, ограничивающих ответственность перевозчика. Хотя, согласно закону, любое соглашение, освобождающее перевозчика от ответственности за ущерб, будет недействительным против получателя, который является держателем BOL. Статья 276 (1) предусматривает ограничение ответственности "на сумму, не превышающую десяти тысяч дирхамов за каждую упаковку или единицу, взятую за основу при расчете груза, или сумму, не превышающую тридцать дирхамов на килограмм на общий вес товара". В соответствии со статьей 276 (2) «если упаковки организованы в коробках или других контейнерах, а в накладной указано количество упаковок или единиц, содержащихся в каждом контейнере, и если контейнер не предоставлен перевозчиком, потерян или уничтожен, он сам по себе считается независимым пакетом или единицей." Однако в соответствии со статьей 276 (3) ответственность перевозчика недопустимо ограничивать, если у грузоотправителя  до момента загрузки имеется информация о характере, стоимости и особой важности товаров.

    Статьи 138-142 дают право судовладельцу, заказчику или оператору ограничить ответственность на основе тоннажа судна. Ограничение заключается в следующем: "A) 250 дирхамов за тонну, где причинен только физический ущерб; (B) 500 дирхамов за тонну, где причиняется только телесное повреждение; (C) 750 дирхамов за тонну, где причиняются как физические, так и телесные повреждения". В 1997 году ОАЭ ратифицировали Конвенцию об Ограничении Ответственности в отношении морских требований 1976 года (Конвенция) Федеральным указом № 118 от 1997 года. Конвенция согласно статье 4 предусматривает, что право на ограничение ответственности теряется только в том случае, если истец может доказать умышленное намерение или небрежность. Это обеспечивает неоспоримое право судовладельцам ограничить свою ответственность, как это было отмечено Судьей Шейном в «Bowbelle» [1990] 1 Rep. Lloyd's Rep. 532. Однако переводы на арабский язык не являются обязательными и, как представляется, остаются на индивидуальное усмотрение. Следует отметить, что статья 138-142 также не отменяется. Закон ОАЭ, основанный на законе шариата, основан на принципе предоставления ущерба, равного убыткам. Это происходит в соответствии со статьями 389 и 390 Гражданского Кодекса ОАЭ, которые предоставляют полномочия судьи при определении убытков и предоставления компенсации. Однако в статье 8 MCL признается, что международные конвенции, которые были ратифицированы ОАЭ, заменяют внутреннее законодательство, и, следовательно, Конвенция должна отменить эти положения. 

    Ограничение ответственности, причиненное по вине владельца судна/перевозчика, запрещено статьей 140. В дополнение, ответственность, вытекающая из помощи при спасении имущества, общеаварийных убытков, прав капитана, команды и их наследников, претензий вследствие ядерного ущерба, не может быть ограничена.

    Перевозчик может согласиться с грузоотправителем по договору и ограничить его ответственность, прямо изложив пункт в BOL об эскалации ответственности грузоотправителя. Исключение из вышеуказанного пункта предоставляется в соответствии со статьей 280, в которой отгрузка в связи с компенсационными или особыми обстоятельствами перевозки конкретного вида груза оправдывает такое исключение. Для того, чтобы исключение было квалифицировано как действительное, должны быть выполнены следующие условия:: (A) Исключение не должно противоречить государственной политике, (Б) Соглашение должно  быть в письменной форме и по необоротной квитанции, (С) Исключение не должно быть связано с должной проверкой, которое предполагается осуществлять перевозчиком или его агентом.

    Уведомление об Убытках

    В соответствии со статьей 280 предполагается, что груз будет доставлен в состоянии, описанном в BOL, если иное уведомление не подается перевозчику. Уведомление должно быть предоставлено в течение семидесяти двух (72) часов с момента доставки груза грузополучателю в соответствии со статьей 281. Однако владелец BOL может потребовать возмещения убытков без уведомления в соответствии с Федеральным законом ОАЭ № 10 Закона 1992 года о доказательствах, если им удастся доказать, что ущерб причинен перевозчиком или обстоятельствами, при которых перевозчик несет ответственность за груз.  Никакое дополнительное уведомление не требуется, если было проведено совместное расследование. В соответствии со статьей 363 владелец должен быть уведомлен в письменной форме о повреждениях, нанесенных товарам с претензией в течение 30 дней с момента доставки указанных товаров. Владельцы груза должны быть уведомлены в письменной форме в течение 30 дней с даты расторжения рейса за потери, понесенные судном в счет требования общеаварийных убытков.

    Право Грузоотправителя на Подачу Иска 

    Право на подачу иска обычно подтверждается BOL или документами, такими как выписка из банка, в которой говорится, что BOL был одобрен банком, в тех случаях, когда банк имеет право это делать. Суды ОАЭ понимают тот факт, что BOL является либо носителем, либо порядком грузоотправителя, либо именем получателя. В таких случаях требуется надлежащее подтвереждение BOL в пользу получателя и доказывает, что у него есть право предъявлять иск.

    Претензия и Совместные Действия Против Владельца 

    принесут совместные действия. Сторона, которая заключила контракт с грузоотправителем по договору, может быть владельцем или заказчиком. Суды ОАЭ признают стороны договора перевозки, которые выпустили BOL, и конкретно идентифицируют перевозчика, указанного в BOL. Тем не менее, суды ОАЭ обычно не принимают во внимание пункт «личность перевозчика» против интересов грузополучателя или индоссата.

    Арест Судна Вследствие Грузовых Претензий

    Концепция морского залога, применимая на международном уровне, не применяется в ОАЭ. Однако статья 115 предусматривает список морских требований, по которым может быть предъявлен арест в судах ОАЭ. Статья 115 (2) (d) и (e) предусматривает, что контракты, связанные с использованием или эксплуатацией судна по договору фрахтования или иным образом, и контракты, связанные с перевозкой грузов по чартеру, накладной или другими документами квалифицируются как морские долги.Таким образом, нарушение перевозки товаров будет соответственно квалифицироваться как морской долг, и заявитель может потребовать ареста, полагаясь на это утверждение.

    Вывод

    Требования к грузам остаются наиболее запутанными типами требований для сторон договора перевозки; Стороны не осознают как юридические, так и практические причины претензий и международно-правовые последствия. Неудача в системах претензий к грузам может нанести ущерб экономике от выполнения их основной функции по содействию торговле. Команда STA по морским грузоперевозкам консультирует перевозчиков и другие стороны по вопросам коммерческой деятельности и имеет опыт оказания помощи морским предприятиям в юрисдикции. Мы надеемся, что эта статья оказалась достаточно информативна.

     


    [i] UAE Federal Law number 26 of 1981 regarding the UAE maritime Commercial Law

     

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    Wed, 14 Jun 2017 12:00:00 GMT
    <![CDATA[Юридическая Ответственность Нового Партнера в Компании]]> Юридическая Ответственность Нового Партнера в Компании

    Новые и стратегические партнерские отношения могут стать отличным способом оживить упадочный бизнес. В течение последних нескольких лет это делалось огромными компаниями - выбор партнера для создания крепости на рынке.Например, Apple и IBM, две колоссальные компании, выбрали партнера в 2014 году. Spotify и Uber также вступили в партнерство в 2014 году, чтобы вместе предоставлять услуги по обмену музыкой и по распределению поездок. Кто бы мог подумать?

    В этой статье мы хотели бы изучить, как новые партнеры включаются в бизнес, их юридические обязанности, особенно в юрисдикции ОАЭ.

    Закон ОАЭ о коммерческих компаниях (Закон о компаниях)[i] определяет компанию как: 

    "Контракт, в соответствии с которым два или более лица обязаны участвовать в хозяйственном предприятии с целью реализации прибыли путем внесения доли в капитале или работе и деления между собой прибыли или убытка, принесенного предприятием».

    Поскольку компания должна создаваться двумя или более лицами, число лиц, необходимых для регистрации и создания компании, зависит от юридической формы рассматриваемой компании.

    Различные юридические формы, которые могут быть приняты компанией, изложены в соответствии с законом в статье 9 Закона о компаниях, в которой говорится, что: 

    "Компания принимает одну из следующих форм: Общество с ограниченной ответственностью; Простая командитная компания; Открытое акционерное общество; Публичное акционерное общество; Частное акционерное общество».

    Законодатели устранили два вида юридических форм: совместные предприятия и компания с ограниченной ответственностью. Это должно обеспечить дополнительную прозрачность и ясность. Поскольку совместные предприятия не имеют отдельной юридической личности, считается, что партнеры достаточно легко  могут исчезнуть, что приведет к существенной потере для других партнеров. Кроме того, компании, ограниченные акциями, почти полностью аналогичны простым ограниченным партнерствам, что делает их существование ненужным.

    В дополнение к этим правовым формам мы также хотели бы упомянуть так называемую компанию де-факто, которую кассационная судебная система определила как:

    "...Коммерческая компания, созданная партнерами, даже если она не является ни одной из форм, упомянутых в пятой статье закона о коммерческих компаниях, является компанией де-факто и (как только она создана) становится юридическим лицом».

    Однако де-факто компании не соблюдают процедуры и положения, определенные законом, касающиеся регистрации компании. Таким образом, эта компания формируется по желанию партнеров. Компания де-факто также может быть создана в силу обстоятельств отличающихся от желаний партнеров. Например, компания может быть сформирована, когда несколько человек наследуют отдельное учреждение, которое, таким образом, превращается в компанию де-факто.

    Например, в компании с ограниченной ответственностью деятельность может быть начата с двумя партнерами, в то время как максимальное число партнеров  - пятьдесят (50). Количество партнеров в частном акционерном обществе не менее трех человек, а в открытом акционерном обществе не может быть менее десяти (10) человек.

    Закон о компаниях ОАЭ, однако, также разрешает включение лица в компанию в качестве партнера после его создания. Однако этот вопрос варьируется от одной юридической формы компании к другой.

    Это приводит к вопросу, в чем ответственность нового партнера, который присоединился к компании после ее регистрации?

    Общество с ограниченной ответственностью

    Статья 30 Закона о компаниях гласит, что: "Компания с совместным участием - это компания, состоящая из двух или более партнеров, которые являются физическими лицами, несут совместную ответственность за все свои средства по обязательствам компании." Другими словами это означает, что партнеры несут совместную ответственность и имеют неограниченную ответственность за все долги своей компании. Кредиторы компании имеют юридические средства для погашения своих долгов партнерами компании, однако закон избавляет выбывших партнеров от этого обязательства.

    Разумеется, новые партнеры могут быть включены в общее партнерство, и одним из способов, которым это может быть сделано, является передача акций от старого партнера, который может уйти в отставку, как упомянуто выше, к новому. Закон также гласит, что партнеры не могут передавать акции без открытого разрешения всех других партнеров, участвующих в компании.

    После того, как передача акций будет одобрена, вышеупомянутое обязательство кредиторов будет применяться к новому партнеру, чтобы последний отвечал за долги компании.[ii]

    Простая командитная компания

    Возможности и обязанности партнеров в простой компании сильно отличаются от возможностей в партнерской компании. Эта юридическая форма компании состоит из одного или нескольких совместных партнеров и одного или нескольких пассивных партнеров. Поскольку первые несут личную ответственность за все обязательства компании, последние несут ответственность только за эти обязательства в пределах своих собственных акций в капитале компании. Текст в вышеупомянутом законодательстве компаний подчеркивает, что любой текст о различии ответственности партнера должен соответствовать его положению, действующего или пассивного партнера (Статья 62).

    Правовые требования о передаче акций, которые применяются к компаниям общего товарищества, также применяются к простым командитным компаниям. Поэтому передача доли может осуществляться в соответствии с договором компании или с одобрением всех вовлеченных партнеров.

    Акционерная компания

    Партнер в акционерном обществе несет ответственность за обязательства своей компании в размере своего вклада в акционерный капитал.

    Партнер в акционерном обществе несет ответственность за обязательства своей компании в размере своего вклада в акционерный капитал.  Партнерам разрешено передавать свои акции, однако этот перевод не принимается во внимание до даты  его регистрации в реестре, связанном с акциями. Несмотря на эту проблему, нерегистрация доли фактически не препятствует новому партнеру требовать его права на эти акции с даты заключения договора купли-продажи. Кассационный суд рассмотрел в этом отношении в апелляционном номере 155/2002, в котором говорится, что:

    "Если в тексте статьи 162 Закона о компаниях говорится, что: «Владение акциями передается путем подтверждения действия в письменной форме в реестре в компании, и эта регистрация помечена на акции …' Это означает, что владение акциями общего акционерного общества не передается от продавца покупателю до даты регистрации его в реестре акций, в котором компания регистрирует все свои доли, однако договор купли-продажи этих акций накладывает обязательство на продавца передать свою собственность покупателю, и это приводит к тому, что его дивиденд переходит покупателю с даты заключения договора купли-продажи, даже если он не зарегистрирован, если не оговорено иное».

    Компания с ограниченной ответственностью

    Партнер в компании с ограниченной ответственностью не несет ответственности за долги и обязательства этой компании, за исключением своей доли. Долги, которые занимают раскрытие финансовой информации этой компании, связаны с ее акциями, поэтому нет существенной разницы между старыми или новыми партнерами. Они также несут ответственность, не зависимо от того, являются ли партнерами-учредителями или только партнерами.

    Что касается общества с ограниченной ответственностью, Закон о компаниях представляет собой определенную систему передачи доли одного партнера другому. И это можно резюмировать в следующем:

  • Партнер, который хочет передать свою долю, должен уведомить остальных партнеров, а уведомление должно осуществляться через управляющего компанией.      
  • Менеджер должен уточнить условия передачи в соответствии с уведомлением партнера.
  • Каждый партнер имеет право получить эту долю в соответствии с согласованной ценой и в случае несогласия, один или несколько экспертов с техническим и финансовым опытом по данному вопросу должны ее оценить.
  • Партнер имеет право делать все, что захочет, с его долей, если прошло 30 дней с даты уведомления о желании передачи.

    Вывод

    Как мы видим, существует закономерность юридической ответственности нового партнера. Это означает, что каждый партнер компании несет ответственность за долги своей компании в пределах своей доли, независимо от юридической формы компании, в которой он участвует. Нет никакой реальной разницы, связанной с юридической ответственностью, между партнерами-основателями и новыми партнерами, которые входят в компанию после регистрации и начала деятельности. И, возможно, это правило оправдано по двум причинам. Во-первых, долг явно связан с деятельностью компании и с акциями, которые составляют капитал этой компании. Поэтому просто имеет смысл, что эти долги не имеют никакого отношения к самим партнерам. Во-вторых, сделано обоснованное предположение о том, что новый партнер решил войти в компанию после полного ознакомления с финансовым положением этой компании. Следовательно, он полностью осознает, что он делает, и делает этот выбор сам по себе. Единственным исключением из этого правила является ответственность совместных партнеров в товарищеских и простых компаниях.

    [i] Federal Law No. (2) Of 2015

     

    [ii] Article 54 - Where a partner joins the company, he shall be jointly liable with the other partners and in all his assets for all the former obligations of the company prior to his joining the company, provided that the company has already disclosed such obligations to that partner, and shall be jointly liable with the other partners for the obligations of the company after to his joining the same. Any agreement between the partners to the contrary shall not be effective as evidence against third parties.

     

     

     

     

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    Thu, 08 Jun 2017 05:00:00 GMT
    <![CDATA[Labeled Liable (Part II)]]> Labeled Liable

    Part II of II

    "Surround yourself with assets, not liabilities."

    Introduction

    Liability is a billion-dollar word. Legally, socially and morally, all actions are subject to and governed by a sense of moderation. A civil liability claim and the concept of abatement go hand in hand since a claim can only sustain its validity during a particular time frame.

    While part one of this article touched on the essential aspects of both civil and criminal liability, exemptions to liability, and the fundamental pillars upon which a civil suit survives, this article goes further to describe the dynamic concept of abatement in civil suits and explicates with a brief case study.

    Despite the fact that the term abatement comes from the French word for batter, abatement doesn't usually hold a negative standing––while abatement reduces something, it doesn't necessarily beat it to a pulp. In civil suits, the focal purpose of abatement is to save time and expenses of a trial in the case where the plaintiff's suit cannot be attained in the original form in which it was presented.

    Article (111) of the Commercial Transactions Law[i] of UAE is responsible for governing the clause of abatement. It provides that in the case of a defect the purchaser shall notify the Vendor within fifteen days of the date on which the item sold is actually delivered to him, and he must file the action for rescission or reduction of the price within sixty days of such delivery date. However, if the defect is hidden and cannot be detected by a routine examination, the purchaser must then notify the vendor immediately when he discovers it, and lodge the action in warranty of the defect within six months of the date of actual delivery, unless there is an agreement to the contrary. Where the purchaser does not notify the vendor of the difference or defect, or if he does not file the action for rescission, price reduction or defect warranty within the period as the case may be, his action shall not be heard unless the purchaser proves vendor's cheating. Even so, the action shall not be heard if lodged after the lapse of one year of the delivery date.

    Case Study

    Moving further, the below-mentioned case study shall provide for an example of a civil liability claim between two parties in a commercial sale:

    The two companies (A) & (B) made a contract upon which (A) supplied (B) with cabling and steel pipes. Both parties mutually agreed on A demonstrating the way such cables and steel pipes are installed, and it would be B's role to install them under A's supervision. The cabling and pipes functioned for five years post-installation after which some faults occurred. Upon inspection of the equipment, it occurred that some damage or deterioration was found in the cables and steel piping. (B) assigned a specialist to inspect them. The latter submitted a report stating that the reason of the faults could be mal-installation, material defects or external factors; the expert did not resolve the cause of the damage. Thereafter, (B) notified (A) with a request to replace the defective goods. On signing the contract, both companies had agreed that the guarantee period shall be one year as of the date of installation and two years maximum as of the date of supplying.

    The question arises: What is the legal position of (A), if (B) filed a liability claim against (A)? And what is company (B)'s legal status in respect of this liability claim? Let's find out.

    Evidentiary Support

    The claim must be backed with evidence: all legislations, whether national legislations or comparative legislations, require the defendant to submit evidence. However, it is not sufficient that the plaintiff submits evidence upon its own findings. This means that such evidence must be reasonable and pursuant to law. It cannot be biased evidence that might be tampered with for a prejudicial reason. Judgments shall not be based on doubt but on facts. Article 1/1 of the UAE Federal Law of Evidence[ii] states that "Plaintiff shall prove his claim and the defendant shall deny thereof".

    We see that company (B) does not have conclusive evidence proving that the liability that occurred is due to the negligence of company (A)'s work since the expert did not zero in on a specific reason. Since their evidence is based on doubt, it is considered invalid and is not fit to prove the subject matter of its claim.

    It is imperative to note that doubt is always interpreted to be in favor of the debtor. It is suspicion, or a result thereof if any pre-conceived assumptions exist.

    The aforementioned expertise report has to be considered valid, and for it to be so, it must be compatible with a putative report that is to be issued by a commissioner with the relevant jurisdiction.

    Responsibility of Company A

    The following three prospects are to be taken into consideration which renders the company (A) not responsible for the claim of the company (B):

  • If the materials used to create the products are of poor or inferior quality or manufactured by a foreign cause, it precludes company (A)'s responsibility of the faulty products.
  • The focal point of the signed agreement is that company (A) is only responsible for explaining how the product must be installed by the company (B) and supervising their attempted installation. Nowhere does it state that company (A) installs the product themselves. Their company only owes education and oversight. As we notice, the company (B) did not allege that company (A) failed in their obligation to provide the appropriate scientific curricula, because they didn't. They followed their contract to the 'T' and performed their contractual obligation. In this case, the trainee failed to fulfill and receive the scientific curricula; hence, it is not the trainer's responsibility if the commodity is damaged.
  • The expert's report cited 'external factors' as a probable cause for damage of products, which would remove responsibility from company (A)'s shoulders.
  • With regard to the agreed warranty between Company (A) and Company (B), the two companies had agreed that the company (A) would ensure the safety of the goods for one year from the date of installation, with a maximum warranty of up to two years from the date of installation. Since it has been five years, and this period has been extended, it is not permissible for the company (B) to ask for any damages caused to the goods.
  • Conclusion

    Typically, product liability claims are based on state laws and brought under the theories of negligence, strict liability or breach of warranty. A set of commercial statutes in every country will contain warranty rules affecting product liability. As we notice from the aforementioned case study, liability claims are complex and subjective to each case. The signed agreement between both parties in the case study protected company (A) from a liability claim that they weren't responsible for due to previously stipulated warranty agreements. Care should be taken as regards to the laws of each country regarding liability claims and the contracts that parties have willingly agreed to so as to ensure premium protection.

     

    [i] Federal Law No. 18 of 1993

    [ii] Federal Law No. 10 of 1992

    ]]>
    Wed, 24 May 2017 16:00:00 GMT
    <![CDATA[Гарантии - Законодательство и Практическое Применение в ОАЭ]]>Гарантии - Законодательство и Практическое Применение в ОАЭ
      «Кредит - это система, при которой лицо, которое не может заплатить, использует другого человека, чтобы гарантировать, что он может заплатить». - Чарльз Диккенс   В современном мире хрупких финансов ирония утверждения Чарльза Диккенса хорошо понятна. На этих нестабильных финансовых рынках должники и заемщики стараются выполнить свои финансовые обязательства. Поэтому банкам-кредиторам и учреждениям необходимо быть осторожными и принимать меры по защите и обеспечению их инвестиций.   Поручительство играет важную роль в сделках с долговым финансированием. В рамках обычной коммерческой практики, гарантии, предоставляемые корпорациями или физическими лицами по долгам третьих сторон, часто используются кредиторами учреждения в качестве одной из форм обеспечения. Хотя гарантии смягчают риск, они не исключают его из сферы финансирования ценных бумаг, даже гарант может не выполнить свои обязательства. Следовательно, кредитор должен убедиться в том, что все вероятности в отношении таких гарантий в ОАЭ предусмотрены.     Независимо от вышесказанного, гарантии обеспечивают дополнительную безопасность для кредитора, поэтому гарантированные ценные бумаги часто являются необходимым условием для предоставления финансирования основному должнику. Настоящая статья направлена на изучение правового ландшафта гарантий и применимости таких гарантий в трансграничных сделках, а также законов, касающихся обеспечения соблюдения этих гарантий в рамках нормативной и оперативной базы ОАЭ.   Правовые основы гарантий в соответствии с Законом ОАЭ Концепция Гарантии основывается на законодательной базе Федерального Закона ОАЭ № 5 от 1985 года с поправками (Гражданский кодекс). В главе V Гражданского кодекса подробно излагается действие гарантии (поручительства) в отношении прав и обязанностей основного должника (должника по обязательству), кредитора (кредитора по обязательству) и гаранта (поручителя). Статья 1056 Гражданского кодекса определяет гарантии как поручительство, состоящее из «присоединения к ответственности лица, называемого поручителем, с ответственностью должника по обязательству при исполнении своих обязательств».   Гражданский кодекс прямо предусматривает условия, которые регулируют выдачу и исполнение гарантий, в том числе:  
  • Для того чтобы гарантия была действительной, основной должник должен быть обязан кредитору в отношении долга или имущества известного лица и должен быть в пределах возможностей гаранта выполнить это обязательство;
  • Если нет требования третьей стороны, основной должник и гарант освобождаются от своих обязательств, если кредитор принимает альтернативный способ погашения задолженности;
  • Обязательство гаранта является вторичным по отношению к обязательству основного должника. Любое погашение обязательств основного должника может погасить обязательства гаранта;
  • Если основной должник становится банкротом, кредитор должен доказать свою задолженность в случае банкротства, в противном случае он утратит свое право требовать или регресса против гаранта в размере понесенного ущерба или любых невыплаченных взносов в связи с тем, что он не доказал свою задолженность в банкротство;
  • При погашении долга кредитор должен предоставить поручителю все необходимые документы, с тем чтобы гарант мог воспользоваться своим правом регресса против основного должника; а также
  • Кредитор имеет право на требование или юридическое обращение в отношении основного должника или гаранта или и того, и другого.
  •   Приоритет Жалобы   Как свидетельствует большинство регулирующих финансовых режимов во всем мире, правовой режим в ОАЭ признает приоритет кредиторов и признает, что простое исполнение гарантии не делает банк или финансовое учреждение обеспеченным кредитором. Для того чтобы зарекомендовать себя в качестве обеспеченного кредитора и иметь паритетный ранг с другими кредиторами на момент исполнения требования, кредитор должен обеспечить гарантию залогом. Такие ценные бумаги могут иметь форму ипотеки или залога в отношении активов гаранта.    Ограничения по времени для обеспечения гарантий   Далее рассматривается вопрос о сроке давности, в течение которого кредитор может действовать против гаранта по уплате им причитающихся ему долгов. Хотя статья 1092 Гражданского кодекса предусматривает, что «кредитор должен требовать долг в течение шести месяцев с даты установленной уплаты, а в противном случае гарант считается уволенным», суды ОАЭ столкнулись с противоречивыми заявлениями.     Хотя Кассационный суд Дубая установил, что гарантия является гражданским обязательством и что требование в отношении гаранта должно быть возбуждено в течение шести месяцев с даты оплаты, Верховный суд в Абу-Даби ограничил свою интерпретацию этой же статьи, чтобы временные ограничения не распространялись на гарантии в коммерческих сделках. Таким образом, общепринятой практикой является мягкое толкование положения о лимитировании сроком на 6 месяцев в соответствующих транзакционных документах, особенно в тех случаях, когда бенефициарами являются банки и финансовые учреждения, которые распространили применимое ограничение срока действия на срок свыше 6 месяцев. Однако эта практика не гарантирует, что положение перестанет иметь силу, вот почему кредиторы должны принимать разумные меры для защиты своих интересов. В свободных зонах или оффшорных юрисдикциях эти законы различаются. Например, законодательство в судах Дубайского международного финансового центра (Суды DIFC) обеспечивает гораздо более широкий интервал времени. Исключая случаи мошенничества, иск не может быть возбужден по прошествии более шести лет с даты возникновения основания для иска. Следует отметить, что в тех случаях, когда законодательство о свободных зонах умалчивает такие ограничения, применяются положения Гражданского кодекса ОАЭ.   Особая гарантия   Чтобы установить, является ли гарантия действительной и имеет юридическую силу, важно установить характер гарантии. В гарантии «всех денег» гарант гарантирует все обязательства основного должника перед кредитором, независимо от того, существуют ли они во время поручительства или появляются в будущем. Тем не менее, такие гарантии могут не поддаваться принудительному исполнению в ОАЭ.   Статья 1061 Гражданского кодекса требует, чтобы гарантии выдавались в отношении определенной задолженности или определенной суммы, и поэтому они должны ссылаться на сумму или объект, гарантированные гарантом. Кроме того, Кассационный суд Дубая постановил, что договор поручительства является недействительным, если он не определяет гарантированную сумму; или включает основание, на которое должна рассчитываться гарантированная сумма; или ссылается на кредитную линию, предоставленную основному должнику.  Хотя были решения, в которых суды ОАЭ признавали и применяли гарантии «всех денег», такие решения не устанавливают приоритет.   Гарантии в отношении дочерних компаний   В большинстве сценариев исходная компания может гарантировать кредит, предоставленный ее дочерней компании (или корпоративной группе компаний в соответствии с уставными документами головной компании) при условии получения необходимых корпоративных одобрений, включая решение совета директоров и акционеров. Аналогичным образом филиал может также предоставить обеспечение в отношении займа своему материнскому предприятию в соответствии с вышеизложенными условиями.   Однако существуют определенные оговорки в отношении гарантирования обязательств компанией. Например, директор оффшорной компании в ОАЭ должен действовать осмотрительно и в интересах компании, как это предусмотрено Федеральным законом № 2 от 2015 года (Закон о компании). Статьи 153 и 154 Закона о компании налагают ограничения на компанию для гарантирования любого кредитного соглашения, заключенного членами совета директоров с третьей стороной, а также ограничивают директора от заключения каких-либо соглашений о займе, которые могут включать гарантии на срок, превышающий три года.   Аналогичным образом, субъекты свободной зоны устанавливают аналогичную ответственность директоров. Статья 53 Закона DIFC № 2 от 2009 года гласит, что «директора должны, в частности, действовать честно, добросовестно и законно с учетом наилучших интересов компании.' В этих обстоятельствах директора как для оффшоров, так и для оншорных компаний должны осторожно приступить к совершению сделки при гарантии финансового риска другой компании.   Гарантия трансграничного финансирования    Правовые рамки ОАЭ не налагают никаких ограничений на гарантии, распространяющиеся от национальных сторон на иностранных кредиторов. До тех пор, пока такие гарантии соответствуют положениям закона ОАЭ или законам оффшорной юрисдикции. Такие гарантии должны быть представлены в письменной форме и указывать сумму, обеспечающую гарантию, как указано ранее.   Однако в случае, если ценная бумага исполняется в отношении недвижимого имущества, такая гарантия не может быть предоставлена иностранным банкам, если у банка нет лицензии на коммерческое банковское обслуживание в конкретном эмирате, где находится недвижимое имущество. Однако на практике иностранные банки, кредитующие заемщиков ОАЭ, как правило, назначают местный банк в качестве агента.    Обеспечение движимого имущества может быть предоставлено иностранным банкам-нерезидентам, за исключением случаев, когда:   i. Если это деловая ипотека в отношении активов в свободной зоне Джебель Али, созданной в соответствии с Законом о коммерческих операциях. В этом случае он может быть распространен только на банки или финансовые учреждения, имеющие лицензию на коммерческое банковское обслуживание. ii. Залог средств на банковском счете. Такие залоги могут быть предоставлены только банку- владельцу счета. Однако на практике иностранные банки-нерезиденты обычно назначают местного агента для обеспечения безопасности.   Кроме того, компания, зарегистрированная в DIFC, может предоставить гарантию по долгу заемщика, кто находится внутри или вне DIFC или ОАЭ, если предоставление гарантии соответствует уставу компании, и после получения необходимых разрешений.   Истечение срока гарантии   Истечение срока действия гарантии перечисляется в Статье 1099 Гражданского кодекса, которая предусматривает прекращение или истечение срока действия гарантии, в частности по следующим вопросам: i. Погашение задолженности; ii. Ухудшение / утрата ценных бумаг в руках основного должника в силу форс-мажорных обстоятельств до подачи требования; iii. Основной договор между кредитором и основным должником, заканчивающийся после того, как кредитор начислил свое право на основного должника; iv. Кредитор, освобождающий гаранта от своей ответственности или должника по долгу; v. Смерть основного должника   Помимо вышеизложенного, как предусмотрено статьей 1101 Гражданского Кодекса ОАЭ, гарантия может быть также расторгнута, если между гарантом, должником и кредитором будет достигнуто соглашение о части задолженности, и если этот долг будет урегулирован, то оставшаяся задолженность будет отменена. В соглашении должны быть четко указаны условия, в которых стороны желают отказаться от ответственности поручителя, и в этом случае гарант не будет нести ответственность и будет инициировано автоматическое прекращение гарантии. На основании указанной статьи кредитор может выбрать требование долга (частично или полностью) в отношении основного должника.   Обеспечение гарантии     Кредитор, уведомив гаранта дефолта основного должника, может приступить к принудительному исполнению гарантии в суде. Правовое обращение кредитора может быть осуществлено в форме либо приложенного заявления в начале, и затем существенного судопроизводства, либо немедленного начала предметного судопроизводства. После получения окончательного решения кредитор может приступить к исполнению такого решения путем ликвидации активов гаранта, а любые средства, реализованные в нем, будут использованы в отношении непогашенных обязательств кредитора, остаток будет переведен гаранту.   Можно заметить, что иск против личного поручителя должен быть предъявлен в отношении имущества личного поручителя в случае его смерти. Применимое правовое положение, касающееся завещания и наследства в соответствии с Федеральным законом ОАЭ № 28 от 2005 года, регулирует распределение имущества резидента или гражданина ОАЭ. Согласно статье 275 вышеупомянутого закона, кредиторы умершего будут иметь преимущество перед любым другим распределением, за исключением любых расходов на захоронение. Порядок создания обеспечительного интереса и его применения подробно рассматривается в нашей предыдущей статье.   Освобождение из-под залога обеспечения   Большинство незарегистрированного обеспечения, в частности движимых активов, освобождается путем передачи владения активом обеспечения обратно гаранту, но также может быть выпущено с письмом об освобождении и отстранении от кредитора. Для зарегистрированного обеспечения, такого как залог, необходимо следовать процедуре соответствующего регулирующего органа, как указано.   Вывод   Правовые рамки ОАЭ, в том числе законы оффшорных юрисдикций, четко определяют способ, которым должна выполняться гарантия. Хотя интерпретация ограничений может быть темной областью, структура и подход, применимые к гарантийным обязательствам, по сути, ясны. Поэтому, в то время, как гарант должен придерживаться и понимать последствия и результат своих действий, кредитор должен обеспечить избежание любой неопределенности для процесса принудительного исполнения без препятствий.   Как благоразумно объяснил Шекспир в "Венецианском купце", если бы Антонио осознал всю серьезность ситуации, согласившись гарантировать долг Бассанио хитрому Шейлоку, он мог бы избежать приближения к тому, чтобы потерять все!   ]]>Sat, 20 May 2017 11:00:00 GMT<![CDATA[Asset Securitization in the UAE]]> Asset Securitization in the UAE 

    (Part II of II)

    In part one of our series on Asset Securitization, we defined asset securitization, reinforced its importance and illustrated the ways in which it useful for financing purposes. In fact, asset securitization transactions had evolved centuries back and were also, incredibly pervasive during the late seventeenth and the early eighteenth centuries.

    Anyone from the Republic of India would easily be able to recognize the name 'East India Company.' This company, a mercantilist corporation of Britain, and South Sea Company, jointly held nearly eighty percent (80%) of the British Crown's national debt by 1729 through the process of asset securitization. They essentially became 'Special Purpose Vehicles' (the SPV) for the British Treasury. Clearly, this process has been pervasive and prevalent for much longer. This part two explores and discusses the concept of securitization within the UAE Regulatory Framework and further highlights the manner of enforcement of security created to secure the rights of creditors.

    Regulatory Framework in the United Arab Emirates

    The securitization market in the United Arab Emirates (the UAE) is at a nascent stage. Hence there is no proper law from which securitization could derive its regulatory framework. However, since its emergence as a leading financial center, the Dubai International Financial Centre (the DIFC ) has been a robust platform for undertaking asset securitization in the country. DIFC has a sound legal structure to facilitate securitization transactions in the country, within conventional and Islamic structures alike. Moreover, in 2008, the DIFC passed the DIFC Special Purpose Company Regulations, which eased the securitization framework within the DIFC for foreign investors and the local businesses. DIFC legal framework comprises of the Law of Security, the Real Property Law, and also the DIFC Security Regulations, which categorically safeguard security created over assets within the DIFC, and by entities based and operating from within the DIFC. Notably, there are several free zones in the UAE, and each such free zone has its regulations for creating security interests by entities licensed within that zone and over assets located therein.

    Any financial transaction is effected and perfected by executing documentation governing the terms of understanding and intent of parties. These documents include the financing documents, which cover the terms and structure of proposed transaction, including security documents, and creating a right over assets of the obligor for its creditors. These documents are a mechanism which ensures a lender's ability to enforce their rights, including taking possession of the property/assets secured, selling it and appropriating the proceeds to repay their debt, in the event obligor, fails to perform. Importantly, the laws applicable to documenting, registering and enforcing security interest created (either in the form of a mortgage or pledge) over assets in the financial transaction are governed by the UAE Commercial Transaction Law (the Commercial Code) and the UAE Civil Transactions Law (the Civil Code).

    In the absence of a separate legal framework for securitization of assets under Dubai law (or; UAE law), the agreements executed between the parties evidencing an Islamic securitization shall be Sharia compliant and adhere to the terms of Civil Code and Commercial Code, both.

    Mortgage

    Article 1399 of the Civil Code defines a mortgage contract to mean "a contract by which a creditor acquires, over an immovable property allocated for the payment of his debt, a real right by which he obtains preference over creditors and creditors following him in rank, for the repayment of his claim out of the price of such property, no matter into whose hands it has passed."

    Article 101 of the Civil Code defines Immovable Property (Real Property) as "anything of permanently fixed nature which cannot separate without damaging or altering its surrounding."

    The Civil Code and Commercial Code (read with Law number 14 of 2008, in cases where the real property located within the Emirate of Dubai) cover the mortgage of 'real-estate' upon terms that are recorded by way of a mortgage deed, by and between the parties. The only way to create a valid and enforceable mortgage is to register the mortgage deed with the appropriate authority (where the immovable property locates). For instance, a mortgage deed gets recorded with the Dubai Land Department and the local Municipality in the Emirate of Abu Dhabi is responsible for registration of mortgages.

    We now examine mortgages created over a 'Musataha' right. Musataha is a form of long-term lease which allows the holder (the Musatahee) the right to use and exploit (including development) the land belong to the land owner for a term of fifty (50) years. The lease is renewable by mutual consent (or; as agreed contractually) for a further period of up to fifty (50) years. Once vested with musataha rights, the musatahee may dispose of such rights in any manner he deems fit. For musataha rights to become active, the musataha agreement granting those rights must be registered either with the Land Department or, the Municipality, as the case may be.

    Similarly, the usufruct is also a form of long-term lease for ninety-nine (99) years. However, usufruct form of 'lease-contract' varies from 'Musataha' as it does not entitle the leaseholder to develop the property.

    It is essential to highlight here that both - Musataha and usufruct can potentially apply to underlying assets for ijara based Sukuk (the Sukuk Al Ijara).

    For safeguarding the interest of the party in whose favor the security creation take place, it is vital to execute and register the security document in the jurisdiction where the property locates, even if the laws of another jurisdiction apply to the financing document.

    Pledge

    • Movable Assets

    Article 1448 of the Civil Code defines pledge to mean "a contract giving rise to a right to retain a property in the hands of an obligee, or a stakeholder by way of security for a right which may be required, in whole or in part, giving such obligee priority over other obligees.

    The Civil Code further provides that it is essential that a pledge must be capable of delivery and auctioned. A 'pledge' must be provided in consideration of an ascertained debt specified at the time of creation of a pledge and created over the movable property. An essential requisite of a perfect pledge is that the creditor must take possession of the movable asset. The asset to be pledged must be in existence at th time of creation of pledge.

    The parties must also record the terms and conditions of the pledge by way of an agreement, which must either be in Arabic or have Arabic translation. There is no formal registration process for pledges created in the UAE and therefor as a prudent step, the document should be executed before the Notary Public to create a record of such security creation, and registered with the local traffic police with a notation of charge on the vehicle's title.

    • Shares

    Creating a pledge on shares involves a written agreement in which all the details of the pledge are set out. Such particulars include the amount, period, event of default, and the terms and conditions pertaining the share pledge.

    Pledging of Shares in joint stock companies and Free Zone companies can effect by delivering the share certificates to the pledgee (mortgagee) as provided for under the UAE Commercial Companies Law (Federal Law Number 2 of 2015, as amended). To effect a valid and enforceable pledge, the 'pledger' should undertake to request the company to register the pledge in the register of shares of the company to secure the full payment of the facility or loan. The pledger shall have the right to receive the dividends and utilize the rights related to the shares unless otherwise agreed in the pledge agreement.

    The Council of Ministers' Decision Number 12 of 2000, shares of a public joint stock company, subject to certain exceptions, must be listed on one of the stock exchanges in the UAE. A pledge over the shares of a listed company is recorded in the share register maintained by the relevant stock exchange where such shares pledged are listed.

    In light of recently amended position about the pledge of shares of a limited liability company (the LLC), Article 79 of the UAE Commercial Companies Law permits shareholders in LLCs to pledge their shares. Any such pledge must be per the company's memorandum and articles of association, under and agreement notarized before the notary public and entered into the Commercial Register maintained by the Department of Economic Development in the relevant Emirate.

    Article 81 of the UAE Commercial Companies Law further provides for a mechanism of enforcement against a defaulting shareholder or partner's pledged shares in the LLC. The creditor enforcing his rights over the shares may agree with the shareholder or the partner and the LLC on the method and terms of sale, by way of private arrangement. Otherwise, the pledged shares shall be offered for sale at court controlled public auction. The shareholder or partner will have the right to buy back the shares from the winning bidder in the auction within fifteen (15) days of such 'auction' on the same terms and conditions.

    For the purpose of enforcement of security, the UAE courts have a vital role in enforcing any security upon a claim being filed by security holder for the realization of debt for the security created. The asset so created shall be realized upon an order passed to that effect. However, since there are no blanket regulations for the enforcement of securities and each case gets decided at the sole discretion of the court, it may sometimes raise uncertainty in the minds of parties.

    An essential factor where UAE scores over other financial markets undertaking securitization transactions are the zero tax regime and non-payment of any stamp duty. The UAE Ministry of Economic Development does not prescribe payment of any amount of stamp duty on any securitization transaction transaction, which otherwise is quite high in other countries, including India. However, withholding tax may have to be paid on remittance of receivables from an entity in the UAE to another outside the UAE.

    Conclusion

    UAE Economy is still emerging in the field of securitization but it has to act swiftly in order to reap the benefits of risk management and liquidity associated with securitiation activity. Though Islamic securitization like conventional structured finance purports to generate equal financial opportunities for the originating entity, each transaction of Islamic securitization may invite different interpretations of Sharia law. This may adversely affect the growth of this activity in comparison to conventional securitization. At the same time, the DIFC legislative framework has extended a great support to the UAE economy to jump start financial activities, including Islamic finance. DIFC has set regulations in place to streamline Sharia compliant financial frameworks. It is extremely promising that DIFC has already become the largest global platform for the Sukuk market. Additionally, with the emergence of the Abu Dhabi Global Markets (the ADGM) in the Emirate of Abu Dhabi, there is a scope for infrastructural development in the country which may make securitization a viable source of financing. There is enough scope for development of the securitization on a viable source of financing. There is enough scope for development of the securitization market in the UAE. It is imperative, however, for the Government to push the envelope and develop laws and regulations to facilitiate securitization activity with ease.

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    Sun, 26 Mar 2017 00:00:00 GMT
    <![CDATA[Post-Closing Transactional vs Ongoing Enterprise Due-Diligence]]>  Post-Closing Transactional vs Ongoing Enterprise Due-Diligence

    "Diligence is the mother of good fortune."

     -        Miguel de Cervantes Saavedra

    Introduction

    In July 2016, the Australian Securities and Investments Commission (ASIC) stated that it's review of 12 initial public offerings (10 of which were small and mid-sized companies), found incredibly poor due diligence processes. These companies often seem to lack documentation to back up the claims they make in their prospectus. This is a very worrying sign for investors and tells us of the immediate need to promote better due diligence practices.

    With the surge in an ever growing landscape of corporate litigation, shareholder activism and a number of disclosure obligations, smaller and mid-sized companies are now seeking the smartest route forward in their growth strategies.  In such situations, companies cannot afford to make a mistake in acquisitions and assume unanticipated liabilities. At the same time, companies do not want to overburden the targeted acquisitions with diligence requests that might disrupt the deal.  Hence, to succeed amidst these competitive conditions a professional process of critical analysis is vital for positive acquisitions or partnerships. It prepares buyers as well as investment partners and lenders with a clear understanding of the story. This needs to be executed by a due diligence process that is planned and implemented in a systematic manner so that there is no space for an unnecessary intrusion.

    The notion of due diligence is often misconstrued to apply solely to mega-deals between large companies. Small and mid-sized companies generally have less sophisticated financial reporting, which could be a prerequisite when a company is trying to secure sources of funding for a transaction. Clearly, due diligence is a necessity in all matters.

    In order to clarify the aforementioned misconception, it is important to define the term. Due diligence is a program of critical analysis that organizations undertake prior to making business decisions in areas, such as corporate mergers and acquisitions, or major product purchases and sales. This process analyzes an organization's previous financial performance records and other necessary reports that help provide business owners and managers with authentic background information on the planned business deal. This, in turn, helps them make cognizant decisions on whether they must carry on.

    Types of Due Diligence

    Commencing the process of due diligence appropriately is of paramount importance. Appointing skilled members to the team is, hence, critical to ensure the information gathered is understood and evaluated precisely. The identification of these team members takes time and money. Buyers must keep an open mind in order to not misjudge the risks and liabilities involved in the transaction.

    After the due diligence investigation has been completed, there are two important steps that must be followed. The first is to create a detailed written report of the investigation conducted. The results obtained must be analyzed thoroughly. This will be important for both parties to develop a plan incorporating the information into the transaction agreement. The second step is as important as the first one but is often disregarded. This step deals with analyzing the information and determining any impacts on the proposed transaction. One must be cautious while dealing with such circumstances. For these purposes, an action plan must be developed to manage the information disclosed. If any buyer determines that information disclosed by the seller is not substantial, he may be precluded from a subsequent claim for recovery based on those liabilities.

    There are two main due diligence processes that need to be considered by organizations: post-closing transactional due diligence and ongoing enterprise due diligence. An organization's post-closing transactional due diligence is designed to check whether key assumptions used to rationalize the transaction are being comprehended. If they are not, the management can be informed and steps for redemption can be taken as soon as possible. It also makes sure that the target company is being integrated into the organization competently.

    Several factors lead to discontent in an acquisition and one of the major factors is the lack of due diligence. In recent years the importance of ongoing due diligence has escalated to a new level by new legislations such as the Sarbanes-Oxley Act of 2002. Ongoing enterprise due diligence is mainly focused on to meet the needs of an organization. It must be viewed as a dynamic process that changes depending on the circumstance of the organization.  An organization's ongoing enterprise due diligence must be structured in such a way that it ensures the organization avoids redundant losses and expenses. The organization's governing body, including the board of directors, trustees or governors must be able to exhibit that it is involved in effective oversight and that job-and-bonus- threatening hostile events are actively being avoided. Ongoing monitoring of the organization's operations and plans is very important while dealing with customers and suppliers.

    Importance of Due Diligence

    This process is crucial to the ongoing success of an organization. This also makes sure activities within the organization are all in compliance with the corresponding law. The due diligence team should keep in mind that apart from taking necessary steps in helping the organization, it must also take steps to keep up with the current trends in new legislation and take proactive action to work on recommendations.

    Hence, organizations that are planning an acquisition or merger should plan to assign sufficient time and resources to discover potential problems with the seller. A failure in reviewing the documents carefully might result in a clash of agreements between the buyers and the sellers. Further, if any action of fraud is discovered after the sale is completed the buyer might be prohibited from bringing an action to court.

    If a serious problem has arisen in an organization, the senior officials are usually the ones who suffer the repercussions. Due-diligence, however, could have furrowed out the problem and the individuals involved could have been terminated. For many senior officials meeting the financial goals is the most important test. It could be very exasperating to motivate the junior workers to achieve high performance and yet suffer due to unexpected liabilities that could have been avoided by due diligence.

    Even after the due diligence processes have been conducted, in order to make sure that none of the provided financial information changes negatively and affects the ongoing relationships of a transaction, Investors, and business partners have to initiate constant monitoring to ensure everything is functioning in order.

    Monitoring is also a useful way for investors and business partners to stay conversant of the current status of litigation or negative events established during the course of initial due diligence processes. If an organization is found to be involved in litigation matters, investors and business partners should consider monitoring these issues until they are resolved. This monitoring can be useful in determining any financial responsibility ordered to be paid by the organization. This is also a method to determine whether the decision-makers of an organization remain the same as when post-transactional enterprise due diligence process was being conducted.  

    Conclusion

    In conclusion, in the midst of the current economic crisis, increasing regulatory and media scrutiny, post-closing transactional and operative ongoing due diligence processes remain as valuable tools to ensure that business transactions, relationships, or investments are not jeopardized. These are not only in the best interest of the organizations as a whole but, also in the rational self-interest of senior management. Both these processes require effort and operational discipline to plan and implement. Monitoring these processes also provides an insight and indications of the current standing of a potential business partner. This up-to-date insight attained through monitoring provides the investors and business partners with the knowledge they need to make decisions that will help in the growth of the business and minimize the potential risks.

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    Sun, 08 Jan 2017 14:00:00 GMT
    <![CDATA[Different Strokes for Different Courts]]> Different Strokes for Different Courts

    In January of 2012, Macy's, a renowned retail store, decided to sue Martha Stewart for entering into a contract with a rival retail store J.C. Penney, which they claimed breached their own contract with Martha Stewart for exclusive products in 2006. This led to a bitter war against J.C. Penney and Martha Stewart, leading to a settlement in 2014, and a revival of Macy's claims against J.C. Penney in 2015.

    This is an example of contracts gone sour. In a typical legal scenario, such as the aforementioned example, when a contract is drafted, an essential point of consideration for parties is the eventuality of a breach of contract and a remedy thereof. In layman's terms, determination of monetary sum to be paid by the defaulting party committing breach to the aggrieved party sustaining a loss because of such a breach. The amount of compensation so determined for the breach is termed as liquidated damages.

    Liquidated damages and its implications under different legal systems

    The claim amount as to liquidated damages is determined at the time of preparation of a contract to compensate towards any delay in delivery or completion of a particular service, or where a service fails to meet a certain specified target. It is, however, imperative to understand that the payment of liquidated damages shall be triggered only upon breach of the stipulated contractual obligation upon a party under the contract and the aggrieved party has consequently sustained losses thereof. The main purpose of awarding liquidated damages to an aggrieved party is to make good the losses and restore such party to its economic position it would have been in, had it not been negatively affected by a breach of contract. Consider the situation where a contract provides for payment of liquidated damages by party A to party B in the event the contractual obligation by party A to complete the work assigned to it under the contract within the stipulated timeline is not met.  Therefore, party A will be liable to make payment of the pre-estimated liquidated damages provided for in the contract only upon its breach of obligation whereupon party B has sustained an actual loss.

    Now, there are numerous cases where the actual loss sustained by the aggrieved party will be less than the amount of compensation provided as liquidated damages under the contract. This disparity in amount will not in itself invalidate the contractual provision since the parties cannot be expected to be able to envisage every such scenario and estimate the losses for each. However, at the same time, if, the stipulated compensation as liquidated damages is significantly higher than the amount required to compensate the aggrieved party for its loss, this stipulation may be construed to be a deterrent of breach of performance, added to compel performance of the contract rather than making good the losses incurred on account of such breach. This stipulation may be characterized by the courts as provision for a penalty.

    The problem often faced by parties while finalizing terms of a contract is determining the losses likely to cause in the event of a breach and therefore end up negotiating a ballpark figure commercially viable and acceptable to both parties, which may be higher than the actual loss suffered at the time of the breach. Therefore, in such scenarios, it may be difficult for the courts to distinguish between a penalty and a genuine pre-estimate of loss.

    This article discusses the varied treatment of liquidated damages vis-à-vis penalty amongst different jurisdictions.

    Legal framework under the English Law

    Under English law, the traditional starting point has always been that a liquidated damages clause will not be enforceable where it constitutes a penalty.  English law does not recognize penalty clauses i.e. provisions which are (as objectively interpreted) penal in nature, in the sense that the detriment (such as liquidated damages) imposed by the relevant provisions is disproportionately excessive in comparison with the legitimate interest of the innocent party (such as its monetary loss and, where applicable, any wider legitimate interest) in enforcing those provisions. The aforesaid rule has been set in stone on the basis of the key decision of the House of Lords' in Dunlop Pneumatic Tyre Co. Ltd. v New Garage & Motor Co. Ltd [i]. which stated that in order for a liquidated damages clause to be enforceable, rather than being a penalty, the amount of compensation payable upon breach must be a genuine pre-estimate of the loss the innocent party would suffer in respect of that breach. If the intention of the liquidated damages clause is to threaten the guilty party into performance rather than to compensate the innocent party, it will likely be seen as a penalty. This means that the clause will be enforceable if the sum was considered by the parties at the time of entering into the contract to be a genuine pre-estimate of the loss that might be incurred as a result of the breach in question. The principle ruled in Dunlop Pneumatic Tyre matter has been relied upon in a number of cases since its decision a century ago.

    Another important question was considered in the case of Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [ii], where it was held that as long as the amount of compensation is not extravagant; it does not mean that it has to be very similar in amount to the actual losses. Further, the point in time for the assessment of whether a stipulated figure is a genuine pre-estimate or a penalty is when the contract is entered into, not when the delay occurs.

    In consideration of the above, in situations where a party faces a high amount of liquidated damages imposed upon it under a contract on a delay in completion of a project, it is likely that Such party may challenge the liquidated damages on the ground that the claim amount of liquidated damages constitutes a penalty rather than a genuine pre-estimate of loss and therefore is unenforceable. However, the court in such situations would require the party making such allegations to establish that the essential reason for the inclusion of such penalty clause was to deter the party from breaking the contract, rather than to compensate the innocent party for the breach.  The proportionality of the damages to the losses anticipated to be incurred is a vital element in maintaining a valid liquidated damages claim. 

    It is imperative to note that the traditional position ascribed by Dunlop Pneumatic Tyre Co. Ltd has now changed in terms of the widely publicized UK Supreme Court judgment of Cavendish Square Holdings BV v Tatal El Makdessi. [iii] The basic principle that a penalty is unenforceable remains unchanged. The real question when a contractual provision is challenged as a penalty is whether it is penal and not whether it is a genuine pre-estimate of loss. The fact that a clause is not a genuine pre-estimate of loss does not necessarily mean that it is penal. What this means is that a penalty clause whose purpose is to punish the contract-breaker is likely to be an unenforceable penalty clause, whereas a clause that is intended to deter a breach of contract is less likely to be a penalty clause, even if it does not represent a genuine pre-estimate of loss. It is important to remember both that the principle behind the new rule is intended to deter a breach of contract and also that this means that the rate of liquidated damages does not necessarily have to be representative of any actual financial loss the aggrieved party may have suffered.

    Legal framework under the UAE Laws

    The principle of liquidated damages under the UAE legal framework is provided under article 390 of the Civil Transactions law [iv] (the Civil Code), which states that:

    "1- The contracting parties may fix the amount of compensation in advance by making a provision therefor in the contract or in a subsequent agreement, subject to the provisions of the law.

    2- The court may, on the application of either party, vary such agreement so as to make the compensation equal to the loss and any agreement to the contrary shall be void."

    For the purpose of interpreting the liquidated damages in terms of the aforesaid provision of the Civil Code, the UAE Court held that "delay fine clauses contained in construction contracts are, in substance, no more than an agreed estimate of compensation that would become due in case of the contractor's failure or delay to perform its contractual obligations. According to article 390 of the Civil Code, it is not sufficient -for the agreed compensation to become due - to establish the element of fault alone. In addition, the element of loss which is suffered by the other party should be established. If the contractor succeeds in establishing the absence of loss, the agreed compensation should be repudiated." [v]

    The UAE high courts have taken a similar view in a number of cases which in essence mean that the court has the power to set aside entirely the liquidated damage, in the event of the party suffers no loss from the breach for which liquidated damages were provided. Further, the court may also revise the amount of liquidated damage in order to mirror the actual loss. In both scenarios, the burden of proof is placed squarely on the defaulting party. Similarly, where the employer contends that his actual loss suffered exceeds the liquidated damages, the burden of proof shall be on him to prove the claim. However, in reality, the court may consider the parties' agreement and may be reluctant to vary the liquidated damages clause unless it is evident that the liquidated damages considerably differ from the actual loss. 

    Another important aspect that differentiates the UAE Law from the English Law is that the Arabic term used, mostly by state courts, for 'liquidated damages' can be translated to mean 'delay fines' or 'penalty clause'. This highlights that the nomenclature of the clause is not a matter of determination before the courts for establishing the veracity of liquidated damages; which has so far been the situation under the common law jurisdictions where the penal nature of liquidated damages has been a ground to refuse their enforceability.  Having said that, the term liquidated damages is also commonly used in the United Arab Emirates, given the widespread use of English language in the UAE.

    Furthermore, under the Civil Code, liquidated damages is a pre-agreed assessment of the loss, thus, it concerns the quantification of damages as opposed to the liability for damages. The liability for damages shall be triggered upon the breach of the primary obligation under the contract. Hence, the aggrieved party's obligation to pay liquidated damages is an ancillary obligation, which will arise when the party defaults in its primary obligation.

    Consequently, if a construction contract is terminated, the liquidated damages clause automatically becomes valueless; however, the defaulting party may still be vulnerable towards a claim for unliquidated (general) damages.

    The aforesaid principle is established by the Dubai Court of Cassation, "delay fines contained in contracts are deemed to be a penalty clause which is a secondary obligation correlated to the primary obligation, and it is a forfeit to the breach of the latter. The ineffectiveness of the primary obligation – as a result of the contract termination – leads to the ineffectiveness of the penalty clause. It follows that the court should not take account of the agreed damages stated in the delay fines clause; the judge may award general damages subject to proof of fault and loss according to the general rules." [vi]

    In view of the above, under the UAE legal framework, despite what the parties may have agreed to the contract, the court or even an arbitrator, as the case may be, is entitled to pass an order changing the terms of the contract to ensure that the damages are in fact equal to the loss that has been suffered by the aggrieved parties. 

    Legal framework under the Indian Law

    Although the Indian law is modeled on the English Law and earlier differentiating the penalty and liquidated damages was also based on English Law, the introduction of the word penalty to the provision of liquidated damages within the Indian Contract Act, 1872 (the Indian Contract Act) by way of an amendment in the year 1899 has revised the interpretation of liquidated damages under the Indian Contract Act.

    Sections 73 and 74 of the Indian Contract Act deal with the provision of liquidated damages. Section 73 states "when a contract has been broken, the aggrieved party is entitled to get compensation or any loss or damages which have been inflicted on him/her naturally during the usual course of breach of contract or about which the parties to the contract has prior knowledge when they entered the contract".

    Further, section 74 further states "when a contract has been broken, and if a sum is named in the contract as the amount to be paid for such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for." A bare perusal of the aforementioned provision evidences that the Indian Law does not distinguish between liquidated damages and penalty. As discussed hereinabove, before the amendment of 1899, all Indian cases followed the common law perspective, but the amendment broadened the purview of section 74 of the Indian Contract Act.

    Hence, in view of the provisions of the Indian Contract Act and the interpretation of the courts, it is understood that liquidated damages under the Indian legal system are based on the genuine pre-estimate of the loss, whereas a penalty is based on the doctrine of reasonable compensation. Section 73 also lays down the principles for damages pertaining to the difference between the cost and price of the goods and services at the time of the contract and the time when the contract was breached. It is therefore upon the courts in India to determine on the basis of the facts before it, whether the case involves liquidated damages or penalty. Also, since under the Indian Law, there is no difference in relation to liquidated damages and penalty, penalty provisions can also be upheld or imposed in certain situations like delay in completion of the work or delay in supply of goods.

    Conclusion

    In today's economic world where cross-border transactions and multi-jurisdiction contracts are a norm, it is essential to understand the interpretation of legal provisions under the relevant jurisdictions which may affect a contract. On an overall assessment of laws under different jurisdictions, it can be seen that liquidated damages provisions can be a powerful tool to help you assert rights and bring a greater degree of certainty under a contract. The parties, however, have to be careful not to be too aggressive when determining the amount of the damages, as the courts will not enforce such excessive clauses. It is therefore much more important for parties to a contract to have a clear understanding of how the penalty rule works and how to word the relevant clause so as to mitigate the adverse consequences that might arise from accepting the proposed amount of liquidated damages. As a result, in order to avoid any complications, any prudent person seeking to include a liquidated damages provision in a contract may want to keep an explanation of the amount of the liquidated damages and why it represents a reasonable and proportionate protection of a legitimate commercial interest.


    [i] [1915] AC 79

    [ii] [2005] EWHC 281 (TCC)

    [iii] [2015] UKSC 67

    [iv] Federal No. 5 of 1985

    [v] Federal Court, Civil Case 25/24. Order passed on 1 June 2004.

    [vi] Dubai Court of Cassation, case 302/21, order passed on 17 June 2001.

     

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    Sun, 01 Jan 2017 19:00:00 GMT
    <![CDATA[Be Aware, else Beware (Part I of II)]]> Be Aware, else Beware

    (Part I of II)

    'Ignorance of the law excuses no man; not that all men know the law, but because it's an excuse every man will plead, and no man can tell how to refute him'

    -        John Seldon

    The law has provided that an ignorance of a fact would be excused. But can a person be excused for his ignorance of the law? In 1974, a tenant had damaged the wall panels and floor boards of his rented apartment. He thought that he had damaged his own property since he had installed the fittings himself. Evidently, he was ignorant of the fact that the ownership of the fittings had transferred to the owner of the house. However, the British Court of Appeals acquitted the defendant and excused his ignorance of law due to the lack of mens rea or guilty intention in conducting his actions. [i]

    Ignorance and mistake are terms of ancient coinage. However, a precise distinction has to be made in order to determine the mistakes which could be excused by law and which cannot be. Judiciaries around the world have laid down impeccable guidelines and principles regarding the extent of ignorance which could be acknowledged by the law. The ambiguity of the different statutes pertaining to 'ignorance of law' has further extended the plight. However, ignorance is a voluntary misfortune. Further, the term ignorance of law is best known as a component of the maxim ignorance of the law is no excuse, which was derived from ancient Latin maxim ignorantia juris non excusat. This phrase captures an imperative concept about the culpability of a crime as it stems from a time when criminal law was grounded in morality along with a shared understanding of wrongfulness which has been referred to by the law as wrong in their essence. This legal principle holds that a person who is unaware of a law may not escape liability for violating that law merely because he or she was unaware of its contents.  The essential public character of a law requires that a legal provision, once properly promulgated, must apply to everyone in the jurisdiction alike,  thus excluding the possibility to justify one's conduct on the grounds that he was simply not aware of the law!

    The Jurisprudence

    Is it necessary for courts to always go back to the ancient Latin periods in order to perceive the existence of modern country and its control over the judiciary arena resulted in the existence of many principles to ensure that authorities will refrain from arbitrarily taking over an individual's rights and emphasizing the fundamental principles of legitimacy and justice. The essence of these principles set out that no act of a person would be considered as a crime unless the law has explicitly forbidden the same and has consecutively prescribed for a penalty. This implies that the law will be the fundamental source which describes the illegal capacity of an act. Federal Law Number 3 of 1987 on the Issuance of the Penal Code (the Penal Code) and Federal Law Number 5 of 1985 on the UAE Civil Code (the Civil Code) has embedded the provisions for 'ignorance of law'. Article 42 of the Penal Code and article 29 of the Civil Code has provided that 'ignorance of law' would not be excused in regard to the criminal and civil offenses respectively. Therefore, a person cannot claim the defense that he did not have any knowledge about the law of the land.

    The wisdom of this principle lies in the fact that the action which constitutes a crime should be known to everyone alike and should be profoundly set out in the law and no punishment may be applied on any doing whatsoever unless there is a text that states that such doing constitutes a crime and raises prescribed penalties. Thus if there is no text stating a prescribed penalty for a particular doing, the judge cannot consider such a doing as a crime even if he is convinced that such and act contradicts the concepts of justice, morals or religion. Moreover, the judge may only impose the penalty which is set out in the law, after taking into consideration the overall mitigating and aggravating circumstances of the case. What is stipulated is that the law should be known to everyone alike so people can be prompted to comply with it and to avoid any actions which may be considered as a crime. Once the above-mentioned provisions are complied with and come into existence, they should be made applicable, without exception to all people alike, regardless of the fact that they did or did not know converse themselves with the relevant provisions. It is thus unacceptable for anyone to claim ignorance of the law or a lack of understanding in a provision or claim, nor claim a misunderstanding of the law, thereby referred to b the term unacceptability of apologizing for 'ignorance of law'

    While some may deny the notion of this principle, it is imperative to note that its consideration falls much in line and in balance with legalities of a society. If people will be excused for their ignorance of law, chaos will prevail everywhere as everyone will be entitled to claim so in defense of their crimes. The above mentioned law therefore does not in any way come in conflict or contradiction to the principle of justice and equality before the law. Legal awareness is a supposed presumption and hence no person is liable to argue an ignorance of the law as a result of his/her personal sickness, illiteracy, or being absent in a country during the formation of the legal ruling.  The questions arise- is this principle applicable on all branches of legal rulings or is it restricted only upon the legislation alone? Are there any room for the acceptance of misunderstandings of this principle and if so what may be applicable? With regard to the scope of applying this principle, there is no dispute that the principle is applied on all legal rules whatever the source of the legal rules may be. Whether it is legislation, religion, tradition or the principles of Islamic Sharia, all principles are applied in fairness regarding whether these rules are imperative, supplementary or explanatory. The dispute however, arose about application of this ruling, on the concept of apologizing for the ignorance of law and the idea on the possibility of annulling a contract as a result of what occurs to one of the contract's party when misunderstanding the law. The supporters of this view thought that the act forms a departure from the principle (prohibiting the apologizing for the ignorance of law) and this apology would be accepted in a case of misunderstanding the law. However, there should exist a clear differentiation between the idea of apologizing for the ignorance of law and the idea of misunderstanding the law in this regard.

    The idea of misunderstanding of the law is different from the idea of the ignorance of the judgment of the law mainly because to undertake it, we should exclude the judgment of the law and put it aside. Therefore if a person claims that is unaware of the judgment of the law, the likely result would be a disposition of the application of the judgment of the law upon him. This is in opposition in the case of misunderstanding the law because if the person misunderstood the law and adhered to this misunderstanding, this does not necessarily imply that he/ she did not adhere to the legal rule in which the misunderstanding occurred and subsequently does not wish it to be implemented upon him. In fact he adheres to the application of the rule in which the mistake occurred and thus the rule remains valid for him despite his ignorance of it. Such is applicable in the case of the heir who sold his share in the estate with the impression that he is inheriting a quarter of the share, when in actual terms it was actually only half. In this case it is considered that the heir misunderstood the law thus allowing him the opportunity to cancel the sale. Therefore, if the seller adheres to cancel the sale based on his misunderstanding of the law, then he adheres to apply the legal rule which he was unaware about and the exclusion of its judgment on him will not be required as in the case regarding the principle of apologizing for the ignorance of law.

    Conclusion

    The maxim which states that ignorance of law is no excuse is generally applied in the criminal cases due to the existence of a criminal intent in the mind of the accused. Every person is presumed to have knowledge about the law of the land. Therefore, the public should ensure that they have an understanding of the various laws in the country in order to conduct their actions without any legal predicaments.

    In order to paint a clearer picture for the reader, Part II of this Article shall further elaborate on the application of the maxim 'ignorance of law is no excuse' and the techniques which have been used by the judiciary in interpreting the same.


     [i] [1974] All Eng. Rep. 632 (CA)

     

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    Sun, 01 Jan 2017 18:00:00 GMT
    <![CDATA[Electronic Registration of Cases- Advantages and Legal Problems]]> Electronic Registration of Cases- Advantages and Legal Problems

    "The Internet is becoming the town square for the global village of tomorrow."

    -Bill Gates

    Introduction

    Dubai has evolved to become the marketing and commercial hub of the Middle Eastern region. A surfeit of investors, traders and tourists flock into the Emirate on a daily or rather an hourly basis. All of Dubai's biggest and most commendable feats have been due to its ability to take calculated risks and introduce the novel, bespoke and contemporary ideas. However, one could believe that disputes and legal matters within the region would eventually increase given the voluminous domestic and cross-border trade, an influx of investors and with the entry of diverse workforce. Therefore, this has simultaneously aided in the elevation of the number of lawsuits in the Emirate.

    To overcome these hurdles resulting from increased law suits the Dubai Courts recently launched an innovative service named Al Salfa which allowed parties to register their cases online and thereby removing the barrier as to physically submitting claims before the court. This is the first program of its kind in the Emirate, and is currently the basis on which cases are currently registered in Dubai. This new program promotes efficiency, speed, and ease, allowing users to register their cases at their convenience. In the first instance, this program was introduced in the year 2010 and was available only to registered law firms and lawyers in Dubai. Soon enough, however, this E-service became available to all clients, enabling them to register all types of cases, orders on petitions, provisional attachments and summary actions electronically. Virtually every matter including real estate disputes, commercial, labor, civil and personal affairs could be instituted under this new online system. Further, the authorities have also permitted orders upon petitions of all kinds, precautionary attachments, and other urgent matters to be instituted electronically.

    The governmental authorities, on the other hand, began to make use of Al Salfa by registering legal delegations, such as delegations in execution or notification. In fact, this service was embraced by the Free Zone Authority in Jebel Ali as well to register all it's labor cases through Al Salfa, thereby saving workers the time and effort it would cost them if they were sent straight to Dubai Courts.

    On their website, the Dubai Courts clarify that the method of online registration, uploading of the statement of claims, and the documents attached thereto shall be reviewed by specialists at the E-services section. The competent authorities, then, would review the details of the case and the papers attached thereto to ensure the validity of the claims and electronically communicate with the suitor to update him on the status of his application.

    Need for Intervention

    As advantageous and easy to use this new service is, legal problems do arise on its application, which we will further explicate in this article. We will review these problems and propose solutions that may be contributed towards the resolving of these problems, hoping that these problems will gather enough attention to lead to registration of cases in all courts, free of any legal problems that may affect the rights of the litigant.

    The positive characteristics of electronic registration of cases via the Al Salfa program are numerous. Cases can be registered at any time and from any place in addition to the smoothness and rapidity of obtaining files and information, saving time, environmentally conscious reduction of paper waste, avoiding overstocked lawsuit files and reducing crowding in court buildings. Furthermore, this service is even available to specialists, judges, executives, bailiffs, secretaries and litigants. In the manual registration of claims, we see problems arising with names of companies that do not actually exist due to its legal form or a change in its name. Electronic registration removes this hindrance as well, as names and addresses are audited in order to establish the actual existence of natural and legal persons before judgment is passed.

    Despite the clear upsides to the usage of this service, the legal problems that arise from the application of this program might affect the validity of claims and procedures, leading to a judgment that doesn't accept a lawsuit or challenge.

    According to the laws stipulated by the Dubai Courts, there is a specific time period during which filing of lawsuits or registration of appeals is permitted and valid. The problem arises when we realize that electronic registration of cases is not technically done on the same day since it is subject to aforementioned reviewing and auditing, which could take months depending on the type of case that is filed.

    The dilemma here is to figure out if the date of electronic submission is to be considered as the date of registration of a case or not.

    Fortunately, however, the Court of Cassation resolved this dilemma by deciding that the date of submission of an electronic application should be taken into consideration [i]. Furthermore, Federal Law No. 10 of 2014 (the Amendment), states in Article 162(1)"The appeal shall be filed by virtue of a memorandum submitted to the Case Management Office at the competent court of appeal. The memorandum shall be immediately registered either in the relevant register or electronically…" Thus, in accordance with the aforementioned law, the date of submission is formally considered the date of filing the appeal, thereby conforming to the time period restrictions on cases, as stipulated by the law.

    In order to file a challenge before the Court of Cassation or Court of Appeals, one must deposit a security with the treasury in order to ensure the validity of the deposit and for orderly compliance.

    Under Article 37, the Law of Civil Procedure, it is stated that [ii]:

    {i.         - The claimant, upon submitting the challenge by appeal in the lawsuits relating to rights, should deposit a security amounted to (AED 1000) in the court treasury.

    {.          - The claimant, upon submitting the challenge by cassation in the lawsuits relating to rights, should deposit a security amounted to (AED 3000) in the court treasury.

    Given that matters were manually registered prior to thelaunch of Al Salfa, there were no problems depositing a security in person. The Court of Cassation has decided in several judgments that in cases where a petition was challenged before the Court of Cassation and where such petition did not carry a proof as tothe payment of fees, such petition would not be accepted as a challenge by the court [iii]. (unless the claimant is not exempted from paying the fee as decided as per the provisions of the law.) However, the aforementioned article 162 of the Amendment doesn't mention the deposit form of security required for an appeal when matters are registered electronically, nor makes any reference as to any such requirement. This legal conundrum, to us, is one of the most concerning contradictions that arise due to the application of the Al Salfa E-service.

    Conclusion

    As we see, the creation of an E-service like Al Salfa has definitely eradicated several cumbersome problems when it comes to registering cases manually and has proven incredibly advantageous to it's users. It is a fascinating and commendable service that does its users a whole lot of good. However, there are some legal complexities that might complicate the usage of this service and encumber it with a sense of powerlessness.

    As a solution, our proposal to a concerned legislator would be the amend the law relevant to the judicial fees of Dubai Court in order to not contradict the Law of Civil Procedures [iv], or perhaps, to cancel the condition of depositing a security upon submitting the statement of appeal. This would be a good way to avoid any doubt regarding the acceptance of appeals that are registered electronically.


    [i] Judgment issued by the Court of Cassation in Dubai on 7/2/2016 in challenge number 709/2015-comemracil.

    [ii] Federal Law no. 11 of 1992

    [iii] Judgment issued by the Court of Cassation Dubai on 15/6/2010 in the challenge No. 144/2010- commercial.

    [iv] supra

     

     

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    Sun, 01 Jan 2017 12:00:00 GMT
    <![CDATA[Medicinal Product Regulation and Product Liability in the United Arab Emirates: An Overview]]>

    Medicinal Product Regulation and Product Liability in the United Arab Emirates: An Overview

    What are the main legislation and regulatory authorities for pharmaceuticals in your jurisdiction?   Response:   Applicable Legislation

    Federal Law No. 4 of 1983 (Pharmaceuticals Law 1983) governs and applies to:

    ·        Pharmacists.

    ·        Pharmaceutical establishments.

    ·        Import, manufacture, and distribution of pharmaceutical products.

     

    Federal Law No. 14 of 1995 (Counter Measures against Narcotic Drugs and Psychotropic substances) regulates the import of medicines into the UAE.

    Federal Law No. 5 of 1984 deals with regulating the licensing and registration of physicians, pharmacists and other healthcare specialists within both public and private healthcare establishments.

    Federal Laws No. 7 of 1975 and No. 2 of 1996 define the specific requirements for the establishment and licensing of public and private medical laboratories, clinics and hospitals in the UAE.

    Regulatory authorities

    The regulatory authorities for pharmaceuticals in UAE are the:

    ·        UAE Ministry of Health (MOH).

    ·        Health Authority-Abu Dhabi (HAAD).

    ·        Dubai Health Authority (DHA).

    ·        Emirates Health Authority (EHA).

    These authorities monitor the licensing of pharmacists and pharmacies, the registration of pharmaceuticals and advertising guidelines for drugs.

    The MOH formulates nationwide health policies and regulates the healthcare market in the Northern Emirates. The healthcare system of the country's two largest Emirates, Dubai and Abu Dhabi, are governed by DHA and HAAD respectively.

    There did not exist a separate entity to regulate the healthcare system in the Northern Emirates prior to 2009. Therefore, the healthcare system of these Emirates fell under the ambit of the MOH before the formation of the Emirates Health Authority vide the Federal Law Number 13 of 2009. This institution was primarily organized with the view to facilitate inter-departmental co-operation between the authorities. EHA is based in Sharjah.

    2. Briefly, outline how biologicals and combination products are regulated in your jurisdiction.

    All biological and combination products (therapeutic and diagnostic products that combine drugs, devices, and/or biological products) are heavily regulated by the UAE Ministry of Health (MOH).

    Drug registration

    A drug must be registered by the Ministry of Health before importing the same within the UAE market (Pharmaceuticals Law 1983).

    Pharmacists

    The Pharmaceuticals Law 1983 also prohibits anyone from engaging in the pharmaceutical profession without a valid license. "Pharmaceutical profession" is defined as the preparation, composition, separation, manufacturing, packaging, selling or distribution of any medicine or pharmaceutical preparation for the prevention or cure of illnesses in human beings or animals (Article 1, Pharmaceuticals Law 1983).

    Pharmacists who practice without a valid license or in breach of its conditions face disciplinary measures (Refer Question 8).

    Imprisonment of up to one year and/or a fine may be imposed on anyone submitting false documents or data to gain a license; or otherwise practicing as a pharmacist illegally (Articles 83 and 84, Pharmaceuticals Law 1983).

    Other offence(s) including adulterating or imitating substances attract imprisonment of up to three years and/or fines of up to AED10,000 (Article 86, Pharmaceuticals Law 1983).

    Pharmaceutical establishments

    Pharmacies, medical store(s) and pharmaceuticals factories require registration and a valid license issued by the Ministry of Health (the MOH).

    Only licensed medical stores and pharmacies are permitted to import and distribute pharmaceutical products. Applicants for a pharmacy or a medical store licence must be UAE nationals.

    The Pharmaceuticals law requires any medical company planning to market its products in the UAE to register with the MOH on the recommendation of the Medicine Companies and Pricing Committee. (see Question 9).

    Registration requirements vary based on the types of products being marketed; and are determined by the classification committee of the MOH on the basis of the information submitted by the applicant.

    See Question 8 for compliance powers in relation to all types of pharmaceutical establishments as well as the penalties for non-compliance. 

    3. Briefly, outline how medical devices and diagnostics are regulated in your jurisdiction. Is there any specific regulation of health IT issues and mobile medical applications?   All medical devices and diagnostics need approval from the UAE Ministry of Health (MOH).

    Medical devices

    The Registration Guidelines issued by the MOH govern the registration and regulation of medical devices. The Registration Guidelines are modelled on international standards for rules and regulations, in particular, those issued by the US Food and Drug Administration and contained in the EU Medical Device Directive (Directive 93/42/EEC concerning medical devices).

    Medical device companies intending to export their products into the UAE must appoint a local representative or distributor who has a licensed medical store.

    The Registration Guidelines provide for four different classes of medical device for the purposes of registration, based on risk factors including, for example, how long the device is intended to be used for and how invasive it will be.

    The appointed local representative or distributor must submit a medical device registration application form to the MOH's drug control department along with the prescribed documents, including ,(http://www.cpd-pharma.ae/downloads/4-Medical%20Device/check.pdf) :

    • Regulatory Approval (certificates of regulatory approval and clearance to manufacture, import or export the device from the export country);
    • risk assessment reports;
    • regulatory status of the device in other countries;
    • details of the device including instructions, warnings, and contraindications;
    • labeling information;
    • declaration of conformity to safety standards and other data on safety and clinical studies;
    • manufacturing process; and
    • other miscellaneous requirements

    If the application is approved, a registration number authorising the import and sale of the device is given, which is valid for five years.

    Diagnostics

    Diagnostics services must submit an application to the Health Regulation Department (HRD) for a licence to establish a new diagnostic centre.

    There is currently no specific regulation of health IT issues and mobile medical applications.

    4. Pricing, Funding and Reimbursement - What is the structure of the national healthcare system, and how is it funded?

    The national healthcare system in the UAE is divided into public and private healthcare providers.

    Public healthcare

    Public healthcare services are operated and regulated by government regulatory authorities such as the:

    • Ministry of Health (MOH).
    • Dubai Health Authority.
    • Health Authority Abu Dhabi.
    • Abu Dhabi Health Services Company (SEHA).

    These authorities work in partnership with foreign healthcare organisations for the day to day running of hospitals and clinics throughout the UAE.

    Private healthcare

    Private healthcare providers are non-government run hospitals and clinics providing specialty or multi-speciality healthcare.

    Funding

    A mandatory health insurance model funds the national healthcare system in the UAE.

    The main sources of funding in Abu Dhabi are:

    ·        Employers or sponsors: employers are responsible for insuring their staff. Those who are not in employment must be funded by a sponsor.

    ·        Government: the single-payer health insurance scheme for nationals is funded by the government, administered by the national health insurance company and regulated by the MOH.

    ·        Individuals: individuals pay out-of-pocket payments and insurance premiums.

    5. How are the prices of medicinal products regulated?   Article 64 of the UAE Pharmaceuticals Law 1983 governs the regulation and fixing of prices for drugs in the UAE.    The medicine pricing and companies committee, established under Article 63, is responsible for registering new medicines and regulating the price of medicinal products.    Profit margins of distributors and pharmacies are fixed by law (Ministry Resolution No. 171 for 2011) which means that pharmacies cannot offer discounts to patients above the permitted margins.   6. When is the cost of a medicinal product funded by the state or reimbursed? How is the pharmacist compensated for his dispensing services?    Private healthcare:   The UAE government can reimburse private health providers for treating government-funded or insured patients.    The patient should submit the reimbursement claim within one month of filing of the original claim. The patient and the doctor must fill the claim form along with the policy number, card number, break-up of expenses and bank details. The patient is also under the obligation to provide other information such as - name of the hospital, date of treatment, amounts claimed and the like. Further, the consulting doctor must provide treatment details to the patient. Subsequent to this, the claim will be assessed by the health providers/insurers within a specific period and in addition to a claim report.    Any person meeting the following criteria would be eligible for health and medical claim in the UAE:
    • Persons under 65 years of age;
    • UAE Nationals;
    • UAE Residents;
    • Direct family members who are listed as the dependants;
    • Unmarried children under 18 years of age and children under 23 years of age who are on a student visa.
    Pharmacies and insurance companies come into contract with a discount percentage ranging from 5% to 10%, in order to ensure that the claims for the products are efficiently dealt with.    The increase in the need for better healthcare and high medical costs led to a public-private partnership by the government. In this partnership, the health institutions are publicly and managed by private parties with the view of improving facilities and infrastructure. Governmental funding primarily depends upon the annual budget that is formulated by the government. However, there is no specific legislative provision which provides that a specific amount should be disbursed into the healthcare industry.

     7. What is the process for this? How do the health providers/insurers claim back the costs? Is there a maximum cost which will be reimbursed? Is it limited to citizens or available to any user? Is there an equivalent to the prescription charge?

    In what circumstances will medical products/medicines be reimbursed eg means tests/types of medical conditions? What kinds of products will be paid for/are there any which will not be paid for?   Does funding have legislative authority? How is the annual health budget/medicines cost calculated by the state?    The Ministry of Health administers all the governmental spending in the healthcare sector. This budget is formed and is administered after taking into consideration the growing need for healthcare reforms and technology in the sector.

    Public healthcare

    The cost of a medical product may be funded by the state in public healthcare facilities or on grounds of charity. 

    Process and Procedures followed by Health Providers and Insurers, Maximum Costs that can be Reimbursed, Circumstances where such costs can be reimbursed, Products that will be paid and allowable v/s products that will not be allowed

    The process and procedures followed by health providers/insurers in claiming back the costs are same as that of the private sector. Also, in response to maximum costs that can be reimbursed and persons entitled to it (citizen, residents, etc) is also similar to that of private sector as clarified in Question 7 above.   Additional question: how does the funding of medical products for public health-care differ from that in private healthcare?   Healthcare sector of UAE is segregated into the private and public sector. Public health service providers are regulated and managed by the MOH, DHA, HAAD and SEHA. Whereas on the other hand, private healthcare service providers are those institutions which are not managed by the government.   What are the legal requirements of providers/pharmacies/responsibilities of government?   The International Pharmacy Federation and WHO with a combined effort have published Good Pharmacy Practice guidelines in order to maintain a minimum standard in pharmacies worldwide.The inspectors in the Ministry of Health follow these guidelines while inspecting the pharmacies. 
    • Legal and ethical requirement: pharmacies must adhere to Pharmacies Law 1983 and MOH code of conduct. 
    • Guidelines on Personnel: 
    • Guidelines on Environment and Equipment 
    • Documents Required
    • Dispensary requirements
    8. Please explain standardized coding systems recently adopted by, for example, Dubai and Abu Dhabi to improve the accuracy of the system of reimbursement from payers to providers and insurance payments system. ? Are there similar schemes planned for the other Emirates?   A comparable standardized coding system of reimbursement have been prescribed in UAE by various health care authorities such as DHA and HAAD. Further, DHA has adopted a US-style coding system including ICD 10 (diagnosis), CPT 4 (medical, surgical, diagnosis procedures) and the Healthcare Common Procedure Coding System (HCPCS). Moreover, the other Emirates such as Abu Dhabi, Sharjah and AL Ain, have a similar standardized coding system in place.   9. Clinical Trials: An outline on Regulations Pertaining Clinical Trials   Legislation and regulatory authorities:   The regulatory authorities for clinical trials in UAE are the:   • UAE Ministry of Health (MOH). • Health Authority-Abu Dhabi (HAAD).  • Dubai Health Authority (DHA).   Guidance on the conduct of clinical trials involving human subjects is based on good clinical practice rules formulated by international bodies including the:   • World Health Organization (WHO).  • US Food & Drug Administration (FDA).  • European Agency for the Evaluation of Medicinal Products (EMEA).  • International Conference of Technical Requirements for the Registration of Pharmaceuticals for Human Use (ICH).    All clinical trials carried out in the UAE must follow the ethical principles set down by the Declaration of Helsinki, which aims to protect the individual rights of human subjects.   Authorisations   For MOH areas (including Dubai, Sharjah, Fujairah and Ras AL Khaimah) the study proposal must be submitted to the ethics committee together with the fees.  The application form can be found here   For hospitals covered by the DHA, submission of the study must be made to the medical research committee (MRC) along with the fee by the closing date and decided by the committee at its regular meetings which are held every six weeks or so.    The primary goals of the MRC are to:   • Protect the mental and physical welfare, rights, dignity and safety of participants in research. • Facilitate ethical research through efficient and effective review processes, to promote ethical standards of human research.  • Review research in accordance with the DHA code of ethics and the ICHGCP guidelines, ensuring that all investigations conform to ethical principles.   HAAD covers hospitals in Abu Dhabi and Al Ain, with research proposals submitted to the ethics committee of the authorised research facility in question. To conduct human clinical research, the facilities themselves need to be licensed and authorised.   HAAD's Medical Research Section aims to:   • Develop the Health Research Strategy. • Define research ethics policies and standards. • Create research funding/grant administration procedures. • Apply evaluation methods and measure key performance indicators of Abu Dhabi's progress in health research.   Decisions on authorisation of trials must be made within 60 days of the committee meeting.    Review   Clinical trials authorised by the MOH are reviewed by the MOH's drug control department, which also issues guidelines based on internationally accepted standards.   Trial protocols must follow the principles of good clinical practice standards relating to:   • Monitoring. • Designing. • Conducting. • Recording, analysing and reporting data and results.   Consent   Freely given, informed consent should be obtained from every subject before clinical trial participation. A written agreement to participate in the trial should also be obtained from the trial subjects or their legal representatives.   Trial pre-conditions The sponsor must provide adequate insurance to the patients or healthy volunteers participating in the trial to cover any potential treatment-related injuries during the course of the trial.   Procedural requirements Trials must be conducted in compliance with approved protocols and all clinical trial information must be recorded, handled and stored accurately and transparently.   Requirements in the good practice code include:   • All clinical trial information should be recorded, handled, and stored in a way that allows its accurate reporting, interpretation and verification. • The confidentially of records that could identify subjects should be protected respecting the privacy and confidentiality rules in accordance with regulatory requirements. • Investigational products, should be manufactured, handled, and stored in accordance with applicable good manufacturing practice used in accordance with the approved protocol. • Quality assurance of each stage the trial should be built in into the system used.]   10. Manufacturing: Regulatory, Compliance and Authorization Process involved in Manufacturing Medicinal Products in Dubai and UAE   Application

    The Pharmaceuticals Law 1983 sets out the requirements for establishing factories for the manufacture of medicines. No-one is allowed to open such a factory a without obtaining a licence.

    Applications for a medical products factory licence must be made to the licensing committee of the UAE Ministry of Health (MOH) along with (www.haad.ae/HAAD/LinkClick.aspx?fileticket=SDq8N_2802s%3D&tabid=1159):

    ·        The memorandum or articles of association of the factory including names of the shareholders.

    ·        Details of the factory manager's licence to practise as a pharmacist and of all the licensed pharmacists who will work at the factory.

    ·        Other documents as determined by the MOH.

    Conditions imposed on licences include those relating to (Articles 47 to 57, Pharmaceuticals Law 1983):

    ·        Site location and premises.

    ·        Mandatory requirements and maintenance.

    ·        Supervision of the factory and laboratories.

    ·        Storage of raw or dangerous materials and manufactured preparations.

    Restrictions on foreign applicants

    Foreign applicants can have a maximum shareholding of 49% in a medical products factory.

    Fees

    The MOH can collect the fees for licences and registration made on condition that the fees collected do not exceed AED10,000 for the factory licence and AED 2,000 for other licences and records.

    The level of fees is determined by the MOH at the recommendation of the licensing committee.

    Monitoring compliance and imposing penalties

    Articles 77 to 88 of the Pharmaceuticals Law 1983 govern compliance powers in relation to all types of pharmaceutical establishments including medical products factories.

    Inspections

    Inspectors are appointed by the Minister of Justice, Islamic Affairs and Awqaf  in consultation with the Minister of Health and Prevention, MOH (Article 77, Pharmaceuticals Law 1983), to monitor pharmaceutical establishments that are suspected of operating without a valid licence or in breach of any other rules.

    Penalties.

    Inspectors can confiscate any substances found on the premises and refer the case to the competent authority (in this case, the licensing committee of the MOH) to investigate suspected violations of the Pharmaceuticals Law 1983 or other relevant rules.

    A hearing is held and the case decided by the committee whether or not the alleged offender turns up. The licensing committee then decides on the penalty, with the approval of the UAE Ministry of Health (MOH).

    Disciplinary measures

    The Licensing Committee of the MOH can impose disciplinary measures  on licensed pharmacists who commit offences as follows (Article 79, Pharmaceuticals Law 1983):

    ·        Warning.

    ·        Suspension for up to one year.

    ·        Withdrawal of the licence.

    The Licensing Committee can impose similar measures on owners  (Article 79, Pharmaceuticals Law 1983):

    ·        Closure of the pharmaceutical establishment for up to 60 days.

    ·        If the offence is repeated, the establishment can be closed for several periods not exceeding six months in total in the same year.

    ·        The licence can be withdrawn.

    Appeal procedure

    The offender can appeal the decision within 15 days from notification to the Minister of Health and Prevention, who must decide on the appeal within 30 days. In all cases, punishments involving suspension from work, withdrawal of a licence or closure of a facility cannot be imposed before the expiry of the period prescribed for submitting the appeal or deciding on it.

    Criminal liability

    Further punishments of fines or imprisonment can be imposed on factory managers, owners or practitioners (Articles 83 to 87, Pharmaceuticals Law 1983) (see Question 2).]

    11. Marketing: Regulatory, Compliance and Authorization Process involved in Marketing of Medicinal Products in Dubai and UAE

    Application

    Any medical company planning to market its products in the UAE must be registered by the UAE Ministry of Health (MOH). The process is covered in Chapter 10 of the Pharmaceuticals Law 1983. Both, the company and the drug must be authorised. Only entities that are themselves registered with the Ministry of Health can apply for product registration.

    Article 1 (9) of the Pharmaceuticals Law 1983 defines 'medicine' as 'any medicine that contains one or more element for treatment or protection of human beings and animals.

    Authorisation conditions

    Authorisation conditions are governed by Chapter 6 of the Pharmaceutical Law 1983.

    To register a medical store or pharmacy with the MOH, the following must be submitted online at the MOH website:

    ·        A valid copy of the commercial licence and/or tenancy agreement.

    ·        Details of all commercial and medical pharmacies owned by the marketing group and a table showing the entire group structure.

    ·        Licence of the pharmacist who would manage the pharmacy with their issue and expiry dates, and contact details of the marketing group.

    ·        Owner's passport/other ID.

    ·        Internal layout of the proposed location.

    ·        Initial inspection fees of AED 100.

    ·        Engineering drawing of the location.

    ·        Planning map for the pharmacy location approved by the municipality plus photos.

    ·        Details of the pharmacist appointed or transferred from another firm to be in-charge of the pharmacy.

    ·        Licensing fees of AED 7500.

    Key stages and timing

    The key stages and timing are:

    ·        Submission of the application online with the required documents.

    ·        Inspection of the composition and ingredients of drugs to be marketed.

    ·        Compliance checking.

    The MOH generally conducts inspections in pharmacies. However, the DHA and HAAD also has the jurisdiction to conduct such inspections in the Emirate of Dubai and Abu Dhabi, respectively.

    The initial response time for licence applications is about one week. 

    Fees

    Fees depend on the type and composition of the medicine to be marketed, advertising guidelines and media type.

    Period of authorisation and renewals

    The authorisation is valid for one year and must be renewed 90 days before expiry.

    The licence is renewed for a period of one year after fulfilling the renewal requirements for the re-licensing assessment

    The licence is automatically cancelled in these circumstances (Article 25):

    ·        Transfer of the ownership of the pharmacy to another person.

    ·        Closure of the pharmacy for six consecutive months without excuse acceptable to the Licensing Committee.

    ·        Failure to commence work in the pharmacy within six months from the date of issue of licence.

    Monitoring compliance and imposing penalties

    Imported medicines and pharmaceutical products cannot be put into circulation without being registered by the MOH (Article 65, Pharmaceuticals law 1983).

    In order for a company to import pharmaceuticals and medical devices into the UAE, a company must:

    ·        Both incorporate in the UAE and obtain a medical importation and distribution licence from the Ministry.

    ·        Engage a local agent or distributor, who is already registered with the Ministry, to import the pharmaceuticals and medical devices on their behalf.

    Any medicine or pharmaceutical preparation which undergoes a change to its constituents must be re-registered (Article 66, Pharmaceuticals law 1983).

    Medical products must also comply with strict packaging requirements  (see Question 18).

    Inspectors appointed by the MOH to the Medical Empowerment and Compliance Department are authorized to inspect any pharmaceutical establishment or store suspected to be dealing in drugs, medicines, and poisons without a ]]>Sat, 10 Dec 2016 17:14:51 GMT<![CDATA[Создание компании в международном аэропорту Шарджи Бесплатная зона: FAQ | Юридическая фирма STA]]> Company Formation in Sharjah International Airport Free Zone (SAIF Zone)

    1. What law established this Free Zone?

    Sharjah Emiri Decree Number 2 of 1995 established both the Free zone at Sharjah International Airport and the Sharjah Airport International Free Zone Authority.

    2. What are the main internal regulations governing this Free Zone?

    Rules and regulations are issued by Sharjah Airport International Free Zone (SAIF) for internal management of the free zone. Any specific regulations governing the governance of company or it's activities are not published on the SAIF website or stated to be applied specifically by the SAIF Authority. Accordingly it can be implied that the Federal UAE laws shall regulate the activities of the companies unlike some Free Zones where internal regulations applies along with UAE laws.

    3. Does this Free Zone have any reciprocal arrangements with other Free Zones?

    SAIF has not publicized any reciprocal arrangements that it could have entered into with other Free Zones in the UAE.

    4. What are the key areas of UAE and Emirate legislation businesses operating in this Free Zone must still comply with? What are the most important examples of how this impacts operations?

    Businesses operating in this Free Zone must comply with several areas of UAE and Sharjah legislations. In general, UAE and Sharjah legislations remains applicable in any area of law such as employment laws, competition laws, intellectual property laws, etc.

    5. What are the key UAE and Emirate onshore agencies a business operating in this Free Zone would need to register or comply with?

    The Ministry of Interiors or the UAE Directorate General office guidelines need to be complied with. These relate to admissible nationalities, profile checks, etc.

    6. How does a company set up in this Free Zone?

    SAIF provides a three-step process of incorporation through the Commercial Department, Leasing, licensing and Legal affairs and the Client and Investor Services Department.

    The first step includes an application for license, project provisional approval and document presentation concerning the company's formation, ownership, and management. The second step includes receiving a license, lease agreement and supply of the keys of an office, warehouse, etc. The third step includes receiving a visa, ID card and other such documents required for entry and working in this Free Zone.

    7. What features do companies set up in this Free Zone have?

    Companies within the SAIF zone are one hundred percent exempt from all commercial levies in addition to 100% import and export tax exemption, 100% corporate and income tax exemption. The companies can be 100% foreign-owned along with 100% repatriation of capital and profits.

    8. What can companies set up in this Free Zone do?

    The companies set up in this Free Zone can carry out activities based on the type of licenses obtained by the company (See Question 16 for type of License issued by SAIF). Accordingly, any medium or light industry can obtain license in this Free Zone. By light and medium industry the emphasis is not on size of business but on type of business activity. The company's business activities may include logistics, general trading and such other manufacturing activities..

    10. What types of business are allowed to operate in this Free Zone?

    SAIF allows a broad spectrum of business sectors to operate in its Free Zone. Business sectors include services such as business consultancy, management consultancy, IT consultancy, selective industrial businesses such as trading in oil and gas products, import and export, technical equipment, logistics, warehouse distribution and storage, etc.

    Business set-ups in SAIF are varied in their nature, type and scope of work. However, due to its close proximity to Sharjah International Airport this Free Zone is one of  the largest air cargo hub in the Middle East and North Africa and it therefore attracts trading companies in a large scale.

    11. What inheritance laws apply in this Free Zone?

    Like any other Sharjah Free Zones, matters of inheritance are governed by Federal Law No. 5/1985 that is Civil Transactions Law (the UAE Civil Code) and by Federal Law No. 28/2005 that is UAE Personal Affairs Law. As a general rule, inheritance issues for Muslims are dealt in accordance with Sharia law, whereas for non-Muslims, the law of the deceased's home country can apply in  case a will. Succession under Sharia law principally operates by a system of reserved shares under which shares of inheritance are pre-determined depending on whom the deceased is survived by. As per the Personal Affairs Law No. 28/2005, a non-Muslim expatriate who is resident in the UAE can opt for the law of their home country to be applied to the distributions of its UAE assets through will. However, the option to choose the personal law of home country is not available to Muslim expats as the sharia law will apply to them.

    12. What taxation applies?

    SAIF exempts the companies established in the free zone from all commercial taxes. However as certain activities are allowed only in the Free Zone, customs duty applies when a Free Zone entity wishes to sell their product onshore UAE.

    13. What accounting and auditing rules apply to businesses operating in this Free Zone?

    The general rules of UAE Commercial Transactions Law Federal Law No. 18 of 1993 (the Commercial Laws and UAE Commercial Companies law Federal Law No. 2 of 2015 (the federal Commercial Companies Law) for accounting and auditing would apply for companies incorporated in SAIF, as no specific body or authority is stated to be authorized to look into the matter. Further, there is no requirement to file accounts within the free zone if that is not provided by the Freezone authority. However, as a matter of practice, companies are required to provide audited account statements for trade license renewal.

    14. Where do businesses operating in this Free Zone generally locate their bank accounts?

    There is no specific provision governing the location of bank accounts in the SAIF Companies Registration Regulation, therefore, the federal Commercial Companies Law applies.

    15. Are there any specific rules governing when movable property in removed from the Free Zone area or transferred into the Free Zone area from another jurisdiction?

    Generally, a Free Zone company may only operate within the Free Zone boundaries and is not allowed to trade directly with the UAE market. However, SAIF Companies and Establishments can sell their products onshore in the UAE subject to the payment of relevant customs duties; hence the same rules may apply for movable property being sold outside.

    16. Are any specific licenses required to operate as a specific type of company in this Free Zone?

    Three different types of licenses are issued in the SAIF - Industrial licenses, Service licenses, and Trade licenses. The Trade license is further sub-divided into Commercial Licences and General Trading Licences).

    The types of legal entities are Free Zone Establishment (FZE), Free Zone Company (FZC) and branches of local or foreign companies. An FZE would be a single shareholder limited liability company and an FZC would be a multi Shareholder limited liability Company with 2 to 5 shareholders.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this Free Zone authority?

    There is no regulation or monitoring of firms/companies by this Free Zone authority, hence general Commercial and Federal Commercial Company Laws would apply. A case against incorporation of a company in the Freezone, or for liquidation, can be filed with the courts of the Emirate of Sharjah.

    18. How are disputes settled with companies in this Free Zone?

     

    Since this Free Zone do not have separate dispute redressal forum or authority the disputes are settled through the general course of judicial redressal system such as courts, Ministry of labour, etc as they are available for other civil disputes. The exception is when another forum such as arbitration or another original court jurisdiction is agreed upon by the parties in the contract. A case against incorporation of a company in the Freezone, or for liquidation, can be filed with the courts of the Emirate of Sharjah.

    19. How are disputes between onshore companies and companies in this Free Zone settled?

    A case would be filed with the courts of the Emirate of Sharjah provided no other forum has been agreed upon between the parties to the dispute. If the parties sign an agreement with an express clause on arbitration in Dubai or the DIFC or any other international arbitration centre, the matter shall be referred to that particular forum. However, in case of jurisdictional issues courts of Sharjah will always have discretionary power to adjudicate upon their own jurisdiction if the case if filled with the courts.

    20. What are the main rights and duties of an employer and employee working in this Free Zone?

    The Free Zones may have their own labour law regulations. However, the UAE Labour Law - Federal Law No. 8/1980 (the UAE Labour Law) still applies and governs the rights and duties of an employer and employee working in the free zones. The Labour Law imposes minimum requirements or provisions applicable, inter alia,  on termination of employment, working hours, annual vacation time and safety standards, which applies to the parties even if contracted otherwise as they are mandatory and cannot be contracted out of it. It is provided that an employee should work only for their employer inside the free zone. Accordingly wages can be paid on a monthly, weekly, daily, or by piece basis in any currency with no minimum wage prescribed.

    Employees are entitled to annual leave of two days per month if their service lasts more than six months but less than one year, and a minimum of 30 days paid leave annually if their service exceeds one year. Employees are also entitled to leave with a full wage on all official UAE public holidays, maternity leave of 45 days with full wage and an additional 10 days unpaid, sick leave of 15 days full wage and an additional 30 days at half wage.

    21. How are employment disputes between employers and employees working in this Free Zone settled?

    The role of SAIF is more of a reconciliatory body in nature. It has no judicial or quasi-judicial authority. A complaint can be made by the aggrieved party to the SAIF Authority, however an application is required to be made to the Ministry of Labour office in Sharjah where the parties must then state their issues and arguments before a Ministry representative. After assessing the matter, a representative makes a recommendation. If the parties fail to resolve the dispute as recommended by the Ministry, the matter is referred to the labour court for litigation and a decision is made on the merits of the case as contended before the judge by the parties to the suit.

    22. What entry qualifications and permits are required for staff working in this Free Zone?

    The investing company and its employees working at SAIF are assisted with their application and in receiving a visa for working in SAIF. The requirements are:

    • The minimum age limit for applying for an employment visa is 18 years and the maximum is less than 60. However special approval can be obtained for the shareholder/managers. The manager of the company's SAIF's operations whose name is mentioned in Trade license.
    • The owner, shareholder and the manager whose names are mentioned in the Trade license, are exempted from the Bank Guarantee. For other employees it is mandatory to deposit with SAIF Authority's Visa & Residence Department Bank Guarantee/Cash Deposit equivalent to one month's salary and a return ticket fare to the country of origin..
    •  The investing company should acquire a Health Card issued by the UAE Ministry of Health for its employees. This requires a medical check-up, obtaining an Emirates ID card, and enrolling in suitable medical insurance. The entire process is facilitated by SAIF
    •  After entering the country, a medical check-up should be done and a report is submitted along with a residence application, within 14 days from the date of arrival to avoid the penalty.
    • SAIF sponsored employees shall work only inside its boundaries.

    23. How are staffs working within this Free Zone registered with the authorities?

    Staffs are registered with the authorities through the guidance of the departments of SAIF in various matters differently.

    24. What rules govern the remuneration and minimum benefits of staff working in this Free Zone?

    The UAE Labour Law governs the remuneration and minimum benefits of staff working in SAIF. (See Question 20 and 25)

    25. What rules govern the working time and leave of staff working in this Free Zone?

    The UAE Labour Law governs the working time and leave of staff working in SAIF. The maximum allowable working hours for an adult employee is eight hours a day or forty eight hours per week, and is allowed to be increased or decreased depending on the profession and working conditions. However, working hours for the employees of commercial establishments, hotels, restaurants, watchmen and similar operations may be increased to nine hours per day as determined by the Minister of Labour. Likewise, working hours per day in respect of hazardous work or work detrimental to health, may be decreased by decision of the Minister of Labour and Social Affairs. During the month of Ramadan, normal working hours shall be reduced by two hours. Employees may not work for more than five consecutive hours per day without breaks. Every employee is entitled to at least one rest day a week. If employees work on a Friday, they are entitled to an additional 50% of their wage; employees cannot be asked to work two consecutive Fridays except for labourers on daily wage.

    26. What are the main features of a property lease in this Free Zone?

    There are various zones hence SAIF provides various options depending on the license of company and its business activities. The property and its lease features are:  

    • Offices: office areas start from 24 square meters.
    • Land plots can be taken on a 25 year lease with a minimum plot size of 2500 square meters. Grace period for construction is 6 months.
    • The Industrial Park provides a minimum plot size of 2500 square meter with a grace period of 6 months for construction.
    • The Prebuilt Warehouse is available in four different sizes of 125, 250, 400 and 600 square meters, including an office.
    • A Temporary Warehouse of 600 square meters is available with additional annual charges.
    • SAIF Zone's Labour Accommodation complex includes 82 buildings to accommodate junior staffs.
    • Terms of lease are usually annual with an option to renew for one year.
    • The leased property may not be used except for the permitted use stated in the lease agreement.
    • SAIF also offers the Business Desk Scheme where a company can have a dedicated desk instead of an office for a cheaper annual lease rate compared to that of an office.

     

    27. Is it possible to apply for a building permit in this Free Zone? How is this done and what steps are required?

    A company wanting a building permit can acquire it through application to the Sharjah municipality, and by following its rules and regulation. This permit is issued for six months for any construction and modification to an existing facility. The permit is issued against approval of drawings, including an approved and valid site plan, the appointment of a Consultant and Contractor, a Building Completion Certificate, and the application of a Building Permit along with valid licenses of Contractor and Consultant, contracting agreement, , and original receipt of security deposits. The Responsible department in Sharjah Municipality is Building permit section -  Al Nasiriya. Further information about this process can be obtained on the website of the Sharjah Municipality.

     

    28. What environmental requirements must construction companies building in this Free Zone consider, e.g. form of building, landscaping or building height?

    Construction companies building in this free zone must comply with all health and environmental standards as set out by the Sharjah Department of Town Planning and Survey (DTPS) as per the Environment regulations. Companies must also comply with the Sharjah Building Code in the construction of their facilities. DTPS advise builders on the use of land, height of buildings, parking areas, loading and unloading points in industrial areas, and locations of petrol stations, commercial centres and other projects. Sharjah Municipality looks into the requirements regarding the number of storeys in a building, minimum space inside rooms, ventilation, lighting, exit and entrance points, passages, elevators and allied aspects.

    29. What are the key restrictions when leasing a property in this Free Zone?

    Only companies incorporated in this Free Zone are allocated land or other property on a lease.

    30. What are the rules governing the use of utilities in this Free Zone?

    The standard terms and conditions of the use of utilities are included in the lease agreement with the rental charges including any utility charges which are usually standard however may differ from party to party on the basis of the type of property leased such as warehouse or office, etc

    31. How do retail premises establish themselves in this Free Zone?

    The rules and regulations specifically governing retail premises are not set out on the website or on any form. However, the brochure specifies restaurants as business activity under any of three license hence it is implied that there is no restriction or any rule specifically relating to retail establishments operating in this Free Zone. Therefore, the same procedure for establishing or incorporating would apply as any other type of business activity.

    32. Is it possible for hotels to operate in this Free Zone - how do they establish themselves?

    There are no specific rules regulating hotels operating in this Free Zone. Hence it would seem that no restriction is imposed on hotel operations. Therefore, the same procedure for establishing or incorporating a company would apply as any other type of business activity.

    ]]>
    Thu, 10 Nov 2016 12:00:00 GMT
    <![CDATA[Ипотечный Залог Воздушного Судна]]>  

    Ипотечный Залог Воздушного Судна

    Сунил Такер и Река Панчал обсуждают технические аспекты, окружающие финансирование воздушных судов, ипотечный залог, управляющее право и несколько судебных прецедентов в контексте ОАЭ, Великобритании и США.

     

    Финансовые рынки имеют важнейшее значение для общего развития экономики. Банковские системы и фондовые рынки способствуют усилению роста и развития, основного фактора в сокращении бедности. Хорошо развитая и устойчивая финансовая система должна повысить эффективность финансовых решений в пользу лучшего распределения ресурсов и, тем самым, обеспечить экономический рост. Аналогично, тщательные и спланированные правовые реформы играют ключевую роль в общем развитии финансовых рынков. Экономический рост, другими словами, эффективно связан с а) снижением затрат; б) повышением доступности финансирования; в) содействием экономической реструктуризации. Этот эффект проявляется в большей степени для тех игроков, которые в значительной степени зависят от внешнего финансирования в отличие от обращения к нераспределенной прибыли. Авиационный сектор является прекрасным примером такого рода игроков отрасли. Финансирование самолетов развивалось (особенно) в течение последнего десятилетия. То, что раньше было бахвальством супер богатых в прошлом, сегодня уже не является недоступной расточительностью.

    Тщательная, хорошо спланированная основа для защищенных сделок отражает важный шаг в улучшении доступа к кредитам и увеличению кредита для финансирования оборудования. Финансирования воздушного судна может быть сложным по следующим причинам, включая а) тот факт, что авиационная промышленность в значительной степени регулируется; б) конфликты или несовместимость законов в зарубежных странах по сравнению с внутренними правилами, создавая тем самым проблемы исполнения для обеспеченных кредиторов; в) владение и регистрация положений (смотри ниже); и г) операционные ограничения и т.д. Дело "Blue sky" и вопросы, поднятые в связи с выбором закона – это только верхушка айсберга, и существуют различные другие аспекты, которые кредитор должен учитывать при заключении ипотечного залога воздушного судна. Для того, чтобы восстановить в правах собственности на воздушное судно в случае неуплаты путем предотвращения перерегистрации в юрисдикции, где воздушное судно используется, является ключевой функцией ипотеки. Несмотря на то, что были предприняты попытки защитить права финансистов на международном уровне Кейптаунской Конценцией, тем не менее существует пробел из-за противоречий в законодательстве или различий в местных законах об ипотеке.

    Чикагская конвенция 1944 года о Международной Гражданской Авиации (Конвенция) имеет дело с регистрацией гражданских воздушных судов (и не государственных самолетов). Объединенные Арабские Эмираты получили доступ к Конвенции 25 апреля 1972 года, Южный Судан является последним в нее вступившим по состоянию на 11 октября 2011 года. В 2013 году президент Совета Международной Организации Гражданской Авиации (ICAO) пригласил Тайвань принять участие в 38-й Ассамблее ICAO, но Тайвань еще официально не вступил в Конвенцию. Статья 18 Конвенции запрещает регистрировать воздушные суда более, чем в одном государстве, а также статья 19 устанавливает, что регистрация судов в любом государстве должна проходить в соответствие с законами и правилами этого государства. В Объединенных Арабских Эмиратах Общегражданская Авиационная Администрация (GCCA) выпускает периодическую публикацию «Информационный Бюллетень Гражданской Авиации» (CAAP), охватывающий Руководство по Требованиям к Регистрации Воздушных Судов. CAAP относится ко всем операторам ОАЭ, а также физическим и юридическим лицам, имеющим законный интерес в регистрации или де-регистрации гражданского военного судна в Реестре Гражданских Самолетов, а также лицам, которым требуется регистрация интересов в Международном Реестре Мобильных Активов, для которых ОАЭ является страной регистрации. В противоположность этому, в Великобритании реестр воздушных судов поддерживается для записи имен оператора или фрахтователя (например, арендатора воздушного судна), и Соединенные Штаты поддерживают регистрацию владельцев, которая ограничена физическими и юридическими лицами США. Конвенция оказывает влияние на Blue Sky One Ltd & Ors и Mahan Air и другой (случай «Blue Sky»)").

    Эта статья построена таким образом, чтобы отразить соображения, которые должен рассмотреть финансист при структурировании сделки по ипотечному залогу воздушного судна:

    1. Положения Собственности

    Адекватное планирование и первоначальная проверка играют важную роль в установлении и определении собственности самолета. Частные самолеты и чартерные рейсы, как правило, под индивидуальным именем или под именем целевой компании (SPV) или фризоны. Законы существенно различаются в разных юрисдикциях, когда речь идет о собственности, как описано выше. В Индии, например, регистрация таких внебалансовых аппаратов, такие как зарубежные целевые компании вряд ли будет принята. Кроме того, Федеральное Управление Гражданской Авиации (FAA) в Соединенных Штатах регистрирует воздушные средства и ставит в ангары под именем физических или юридических лиц США. Неамериканские владельцы обязаны назначить трастовую компанию, и эта компания будет обладать правом собственности на самолет от имени таких иностранных владельцев. В случае формы договоренности в виде аренды, арендодатель должен быть идентифицирован и зарегистрирован в качестве владельца в реестре Управления Гражданской Авиации.

    В том случае, если аренда не является истинной, зарегистрированным владельцем должен быть арендатор. Это становится все более сложным при аренде смешанного использования , так как FAA может проявить беспокойство и счесть такую смешанную аренду условной продажей. В этом случае, основываясь на опыте автора, желательно получить письменное заключение от юридического департамента FAA перед заключением сделки.

    В тех случаях, если воздушные суда регистрируются под целевой компанией, то финансовая документация обычно включает договор купли-продажи воздушного судна, договор о предоставлении кредита и документы по безопасности. Пакет документов по безопасности включает в себя следующее:

    • А. Ипотека самолета, которая даст финансирующей стороне, среди прочего, право на продажу самолета по умолчанию в качестве обеспечения по самолету. Как упоминалось выше, может быть невозможно использовать местный закон об ипотеке над воздушным судном, так как она не признается в любой форме действительным типом залога в некоторых юрисдикциях, как например, в Бельгии. В таких странах финансирующая сторона должна рассмотреть другую форму обеспечения безопасности и эффективности такого механизма для защиты своих прав. При невозможности нахождения механизма, защищающего соблюдение интересов безопасности, необходимо воздержаться от финансирования сделки с участием стран, имеющих неоднозначность по обеспечению соблюдения права интересов безопасности;
    • Б. Разумно иметь кредитный договор с гарантией целевой компании от материнской компании или бенифициарного собственника в качестве гаранта. Такая гарантия является обеспечением правовой защиты в отношении конечного бенифициарного собственника целевой компании, который обычно является компанией с ограниченной ответственностью или индивидуальное лицо с высокой чистой стоимостью активов. Это обеспечит сотрудничество целевой компании для реализации безопасности финансирующей стороны касательно воздушного судна. Дальнейшие соглашения включают многосторонние соглашения и контракты переуступки залоговых прав компаний специального назначения и/или оператора, относящиеся к техническому обслуживанию и эксплуатации воздушного судна, например, эксплуатационное соглашение или договор управления, механизмы обслуживания и страховые полисы на летательное средство и присвоение гарантии производителей.
    • В. Другим средством для обеспечения безопасности является наличие обременений акций заемщика, которым является, как правило, целевая компания, или даже принятие ответственности за акции компании, выступая в качестве гаранта, т.е. материнской компании. Физическое или юридическое лицо, являющееся поручителем, может быть не заемщиком, но должно быть владельцем акций заемщика. Необходимо получить юридические консультации по законам юрисдикции заемщика относительно прав по именным акциям в отличие от предъявительских акций.
    • Г. Многосторонние соглашения должны быть составлены, если воздушное судно зарегистрировано в юрисдикции, которая не является благоприятной по отношению к кредитору. Многосторонние или трехсторонние соглашения могут помочь финансирующей стороне гарантировать, что оператор обязуется следовать ее указаниям. Соглашение между финансирующей стороной, оператором и заемщиком необходимо для того, чтобы убедиться, что оператор будет использовать воздушное судно в благоприятной для кредитора юрисдикции согласно инструкции финансиста, чтобы обеспечительный интерес был легко выполним в случае дефолта. 

    2. Место регистрации

    • А. Особое внимание должно быть уделено регистрации финансируемого воздушного судна. Кроме того, необходимо изучить, может ли финансирующая сторона обеспечить свои проценты как заемщик в случае залога воздушного судна в государстве регистрации. Это подтверждение того, что государство регистрации признает такую форму ипотеки. Уместно отметить, что некоторые страны даже не рассматривают ипотеку самолета как допустимый вариант обеспечения в любой форме, и следовательно нужно рассматривать залог или другие формы для эффективности сделки. Например, в Объединенных Арабских Эмиратах стороны могут зарегистрировать ипотеку в Управлении Гражданской Авиации. Кроме того, возможно утвердить коммерческий залог над самолетом, а затем зарегистрировать залог в GCAA.
    • Б. Конвенция касается регистрации воздушных судов. Как уже говорилось выше, Конвенция предусматривает, что воздушное судно может быть зарегистрировано только в одной юрисдикции единовременно. Однако, регистрация воздушного судна может меняться из одного контрактного государства в другое. Это будет определять, будет ли применяться закон регистрации или «lex situs» для обеспечения ипотеки. Lex situs означает, что когда право собственности переходит с воздушного судна, законность ипотеки или передача движимого имущества определяется законами того места, где актив физически находится в момент передачи, т.е. во время оформления ипотеки.

    3. Выбор права и законов, регулирующих ипотеку воздушных судов::

    • А. Права по залогу самолета могут привести к некоторым сложностям при работе с различными юрисдикциями. Некоторые юрисдикции могут требовать обязательной регистрации ипотеки для того, чтобы ипотечные права были эффективными. Соответственно, место регистрации считается действительной правовой коллизией, которая также называется «lex registri»; некоторые государства учитывают закон страны документа о правопередаче («lex loci actus»), в то время, как некоторые применяют закон места нахождения имущества («lex situs»), как например Англия. Некоторые юрисдикции могут применять законы места, где зарегистрирован должник, или где осуществляется ипотека, т.е. надлежащее право передачи.
    • Б. Обычно Английское право и право Нью Йорка является частым выбором для иностранного права ипотеки, так как они считаются благоприятными для кредиторов. Выбор иного права, чем право регистрации (иностранного права ипотеки), которое называется местным правом ипотеки, должно быть рассмотрено по вопросу исполнения интересов безопасности. Следовательно, финансирующая сторона в качестве залогодержателя нуждается в местной юридической консультации, чтобы гарантировать, что ипотека воздушного судна действительна и возможна в юрисдикции, где она, вероятно, будет проходить. Например, согласно английскому праву, применимо понятие «lex situs». Соответственно, если требуется, чтобы к ипотечной сделке применялось английское право, то самолет должен:

    i.            Находится в Великобритании; или; or

    ii.          Находится в международном воздушном пространстве во время исполнения ипотеки или когда сделка закрыта; или;

    iii.          Если первые два условия выполнить не практично, то финансирующая сторона должна получить правовое заключение от юристов «lex situs», признает ли та юрисдикция, где воздушное судно находится во время сделки, действительность английского права по ипотечному залогу. Например, Франция и Швейцария являются одними из юрисдикций, которые не принимают английский закон об ипотеке.

    iv.          В соответствии с вышесказанным, финансист воздушного судна должен добиться юридически закрепленной и эффективной безопасности по отношению к самолету в любой из юрисдикций.

    Заключение

    С учетом вышесказанного, предполагается, что безопасность должна обеспечиваться в соответствии с Кейптаунской Конвенцией, однако заемщик должен находится в стране заказчика. В противном случае, рекомендуется получать ссуду в соответствии с законодательством регистрации, особенно когда воздушное судно физически расположено в этой юрисдикции. Другим средством обеспечить безопасность является ипотека в соответствии с Английским или Нью-Йоркским правом, если она признается в других юрисдикциях, или зависеть от акций заемщика целевой компании, по которым финансирующая сторона может вступить во владение воздушным судном по умолчанию. Таким образом, кредитор может проводить сделку продажи воздушного судна, поручив заемщику заключить договор о продаже с третьей стороной, который предусматривает оплату за продажу непосредственно кредитору. Предложения должны быть рассмотрены на индивидуальной основе с учетом факторов и юрисдикционных законов, указанных в данной статье   

     


    [i] See A. Saunders & I. Walter, Proposed Unidroit Convention on International lnterests in Mobile Equipments Applicable to Aircraft Equipment through the Aircraft Equipment Protocol - Economic Impact Assessment, (A Study prepared under the Auspices of MSEAD and the New York University Salomon Center, September 1998)](1998) 23:6 Air & Space Law 339-416

    [ii] See Evolution of Aircraft Finance Law - Considerations of the UNIDROIT Reform Project Relating to Aircraft Equipment, Yan Wang; page 1

    [iii] [2009] EWHC 3314 (Comm) and [2010] EWHC 631 (Comm) – the case was heard in two phases.

     

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    Thu, 28 Jul 2016 02:00:00 GMT
    <![CDATA[Пятнистый подделка: подделка по закону ОАЭ (часть 2 из 2)]]> Spotting the Fake: Forgery Under UAE Law 

    Part 2 of 2

    In the previous issue we discussed material aspects relating to forgery under UAE Criminal Laws and other statutes. We discussed broadly – the definition of forgery, types of forgery (material and moral), legal implications of denial in light of law of evidence and finally we referred to some relevant court decisions on the matter. Mr. Ghany continues with part 2 of this two paper series and discusses other broader aspects relating to challenging a claim based on forgery, procedures for challenge, and relevant court precedents on the matter.

    Everyone should have enjoyed the thrill in forging their parent's signature on a sick-leave note for school or in watching the tales of the celebrated forger, Frank Abagnale, in the 2002 thriller 'Catch Me If You Can'. However, what if someone forges your signature on a cheque amounting to millions? Or in a document relating to the fraudulent sale of your apartment? Yes, doomed is the right word! It is, therefore, significant to envisage about the procedures that have to be followed in a predicament of forgery. Federal Law No. 10 of 1992 regarding the Evidence in Civil and Commercial Transactions (the Law) deals with the provisions that govern the hornet's nest of forgery in the Arab nation.

    The 'curtain-raiser'

    The provisions of the Law and the pronouncements of the courts in the country has manifested that a defendant cannot dispute the authenticity of an official document by his mere denial. Rather, the defendant is required to challenge the document on the grounds of forgery which was attributed to him by his handwriting or signature, stamp or finger-print. Similarly, a party will have to challenge the document on the grounds of forgery if he has admitted the validity of the stamp but has denied the impressions or the particulars contained the same document. This can be elucidated with the help of the following illustration: Suppose, the director D of company A has disputed the authenticity of the particulars of a document after accepting that the stamp on the letterhead of a document belongs to company A. In this instance, D would be required to challenge the document rather than simply denying its authenticity.

    Help Yourself!

    The Law has provided that a party who challenges the authenticity of a document is placed with the burden to prove the subject matter of his challenge and supplement the same with a memorandum. The judgments of the court have also aided in providing an undisputed interpretation of articles 23 of the Law regarding the subject matter of a party's challenge of a document. However, the court does not have the obligation to verify the document if the party claiming the forgery has not provided any substantial evidence or if he has not requested for an investigation of the same. Further, the authenticity of a document can be challenged on the grounds of forgery at any stage of an ongoing litigation. Provisions from articles 28 to 32 of the Law has provided for the procedures to be followed in an event of forgery. The Law provides that a memorandum, challenging an allegedly forged document, should be submitted to the court with following particulars:

    ·        the points of the alleged forgery;

    ·        his evidence; and

    ·        the process of investigation which should be followed in order to prove the forgery.

    However, it is not necessary for a party to defer until a forged document has been brought against him as the nation believes in the policy 'prevention is better than cure'. Hence, article 33 of the Law entitles a party in an informal document to institute a suit in order to pursue the other party to admit that the underlying document has been imprinted in the handwriting, signature, seal or fingerprint of the latter party. Further, the document would be considered to have been imprinted by the defendant if he does not deny it. However, an investigation would be initiated if the defendant has denied his role in the execution of the document in question. The 2010 judgment[1] of the Dubai Court of Cassation had relied on this provision and provided that any party who apprehends the future use of a document has the right to challenge the same on the grounds of forgery.

    In cases where Mr. A submits a document (say, a receipt) before the court against Mr. B and upon review of the receipt, Mr. B invokes a claim for forgery, in such cases – Mr. A can request the court to suspend and cancel the proceedings on the premise that he will not rely on the said receipt. The courts in such instance demand custody of the receipt (and; other documents if any) if Mr. B requests the courts to do so to maintain B's interest. That said, it is imperative to mention that the courts in their absolute discretion may reject Mr. A's request if in the opinion of the court – the receipt is in fact forged.

    Furthermore, a party who apprehends to be confronted with a forged document is also entitled to institute a suit against the holder of that document under article 34 of the Law. The Dubai Court of Cassation has taken the view that the scope of article 34 is to be provided for those who fear or apprehend the use of a forged document. Furthermore, the court has stated that the authenticity of a document cannot be challenged if it has been used or relied upon by the parties. Therefore, it is imperative to percept that a suit for forgery must be instituted immediately after the forgery has been apprehended by the party. A separate suit, however, need not be filed by a party if the forger of a document has relied on the same for instituting an existing suit.

    Further, in an infamous case that was disputed before the Dubai Court of Cassation, a person disputed his signature on a guarantee and consecutively, the court ordered in its remitting judgment that the document be passed to the criminal laboratory for a comparison to be made between the true signature of the person alleging the forgery and the signature appearing on the document, in order to establish whether he was in fact the guarantor of the debt the subject matter of the action.  Instead of sending the document to the criminal laboratory, the appeal court to which the case was remitted instructed an expert to express an opinion on whether the genuine handwriting and the handwriting in the document were the same, and to state whether writing had been subsequently placed on a document signed in blank.  The expert was not able to express a conclusive opinion as to whether the signatures were the same; however, he did express the view that the document was signed in blank and that the terms of the document were filled in later. Further, the court of appeal took the view that this invalidated the document.  However, this judgment was wrong at law, as there is nothing to prevent a document being signed in blank and then becoming a valid document when further particulars are filled in, provided that the person who has signed in blank has authorized this to be done, and there is no fraud involved.  Further, the Court of Cassation had specifically ordered that the document be sent to a criminal laboratory for a comparison between the true signature and the allegedly forged signature.  The court of appeal did not abide by that order, whereby the judgment of the court of appeal was deemed defective and was consequently set aside.

    In another case, the Cassation Court of Dubai observed that the ratification of a document does not prevent a challenge for forgery as the same can be made against any documents whether formal or customary or issued outside the country[2]. The suit for forgery would be maintainable even if the document has been attested by the official authorities of the country in which the documents were issued.

    The Judiciary

    The Law has conferred the court with the authority to order for an investigation if the same is not convinced with the facts and evidences regarding the veracity of a document; or if the court deems that the investigation requested by the party could produce a justifiable outcome. Such an investigation would be carried out by verifying the documents or obtaining testimonies of witnesses or both. Further, the investigation process would stand suspended if the party challenging the authenticity of the document relinquishes his claim. However, the court would subsequently seize the document if the challenging party has abandoned his claim at any stage of the investigation. The Law has also conferred the courts with the authority to reject a document on the grounds of forgery, even if the parties have not challenged the authenticity of the same. However, the court is required to explicitly state the circumstances and the evidence which proved the fraudulent fabrication of the document. Further, the courts can order for an investigation into the issue of forgery if the appointed forensic laboratory is not convinced with the scope of evidence that has been provided to it[3]. Therefore, it is evident that the Law has provided for effectual provisions regarding the protection against forgeries in the nation. However, one should invariably conduct due diligence about legally binding documents before authorizing or signing them.

    This concludes the two part series on forgery law. STA's team of criminal lawyers in Dubai and other offices will continue to deliver bespoke legal information that will lay your curiosity to rest. Court Uncourt is now available on Apple iOS and Google Play. Thankfully, Apps cannot be forged at least as of now!


    [1] Commercial Appeal No. 260 of 2010

    [2] Ruling of the Dubai Court of Cassation in the Civil Appeal No. 228 of 2009

    [3] Ruling of the Dubai Court of Cassation in Commercial Appeal No. 3 of 2010

     

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    Thu, 28 Jul 2016 01:15:00 GMT
    <![CDATA[Агентское право в Российской Федерации – Вопросы и Ответы]]> Агентское право в Российской Федерации – Вопросы и Ответы

     

    STA продолжает оставаться в авангарде торговли и коммерческих отношений через государственные границы. Поскольку мы продолжаем консультации клиентов по вопросам франшизы и агентского права на российском рынке, в этом выпуске мы внимательно посмотрим на положения российского законодательства, касающиеся агентств.

    Вообще говоря, агентский закон имеет дело с ситуациями, когда один человек вступает в правоотношения с другим лицом, действуя не лично, а через посредника. Агентский закон имеет важное значение, так как дает возможность заключения коммерческих сделок, когда в силу разных обстоятельств человек не в состоянии участвовать лично. Агентский закон также предлагает ожесточенному рынку выгодные деловые практики, позволяющие расширять бизнес без физического присутствия, что, в свою очередь, предоставляет множество возможностей. Поэтому справедливо сказать, что возможность бизнес-операций через агента является гарантией реализации права человека на свободу и инициативу деловой активности. Говоря об инвестициях со стороны государственных игроков Российского Фонда Прямых Инвестиций или косвенных инвестиций более мелких участников – факт остается фактом, интерес к российской экономике со стороны инвесторов Ближнего Востока находится на подъеме. Ранее торговля между странами ограничивалась инвестициями в нефть, но эта тенденция, очевидно, меняется.

     Какой закон регулирует агентские отношения в Российской Федерации?

     Гражданский Кодекс Российской Федерации (Гражданский Кодекс) регулирует и регламентирует назначение агентов в России. Кроме того, услуги коммерческих агентств регулируются с помощью международных соглашений и/или конвенций, а именно:

    • Гаагская Конвенция 1978 года о праве, применимом к агентствам; on the Law applicable to agency;
    • Римская Конвенция 1980 года о праве, применимом к договорным обязательствам;
    • Женевская Конвенция 1983 года о международной купле-продаже товаров;
    • Типы коммерческих контрактов Международной Торговой Палаты (МТП) (публикация №496) (ICC) (Publication No.496);
    • Руководство МТП по составлению контрактов коммерческих агентств (публикация МТП №410); а также
    • Комментарий МТП по контрактам коммерческих агентств (публикация МТП №512). 

    Как агентские отношения определяются в соответствии с ГК РФ?

    В соответствии со статьей 1005 Гражданского Кодекса, «под агентским соглашением понимается действие [когда одно лицо (агент) от имени другого лица (принципал)] за вознаграждение принимает юридические или иные действия под своим именем, но за счет принципала, или и под именем и за счет принципала"'.

    Статья 1007 Кодекса устанавливает, что принципал и агент могут включить положение об экслюзивности, что потребует от принципала воздержаться от заключения подобных договоров с различными агентами на одной территории. Понятие эксклюзивности имеет существенную связь с территорией, на которой агентский договор будет исполняться. Принципал должен будет воздержаться от заключения подобных соглашений с другими агентами на территории, опреденной в агентском договоре до тех пор, пока существует положение об эксклюзивности в самом соглашении.

     Агентские отношения бывают двух типов:

    • Когда агент совершает действия от своего имени, но за средства принципала; and
    • Когда агент выполняет действия от имени и за средства принципала.

    Коммерческий агент – это лицо, которое имеет прямые полномочия действовать от имени принципала. Коммерческий агент может не только заключать сделки или продажи иностранных товаров, но и вести рекламную кампанию в то же время.  

     

    Принципал это лицо, которое дает разрешение коммерческому агенту для выполнения юридических и иных действий от его или своего имени.

     Каков объем полномочий, которые могут быть переданы агенту? Как агент связан с принципалом этими действиями?

     Принципал должен предоставить агенту законные практические и конкретные инструкции о том, как он должен выполнить предмет агентского договора. Иногда возникают ситуации, когда агент сталкивается с дилеммой при выполнении поставленных задач. Пункт 2 статьи 973 Кодекса предоставил агентам полномочия отклониться от указаний принципала, если это необходимо в сложившихся условиях и в интересах самого принципала. Тем не менее, агент должен при этом находиться в ситуации, когда он не смог получить разрешение принципала на отклонение от инструкций. И он должен сообщить подробности о произошедшем в самые короткие сроки.

     Если агент заключит сделку с третьей стороной от своего имени и за счет принципала, агент будет нести ответственность перед третьей стороной, даже если принципал был назван в процессе сделки или вступил с третьим лицом в прямой контакт для проведения сделки. Тем не менее, в сделке, совершенной агентом с третьей стороной от имени и за счет принципала, права и обязанности ложатся непосредственно на самого принципала (Статья 1005 (1) Гражданского Кодекса).

     Что делать, если агент превышает полномочия, предоставленные согласно агентскому договору?

     В соответствии со статьей 183 Гражданского Кодекса, если агент превысил полномочия, предоставленные ему, и вступил в конкретную сделку, такая сделка будет считаться заключенной агентом, не принципалом, если только принципал эту сделку не одобрил.

     Хорошо, существуют какие-либо формальности при назначении агента?

    Нет. Нет никаких как таковых формальностей для соблюдения в соответствии с ГК РФ при назначении агента. Агентские отношения могут быть установлены либо на основании письменного договора или устной договоренности. Тем не менее, коммерческие контракты по внешнеторговым сделкам должны быть заключены в письменной форме. Кроме того, в дополнение к агентскому договору принципал может выдать доверенность (POA) на имя агента для расширения его возможностей действовать от имени принципала.

    Какие типа агентских отношений существуют и признаются на территории Российской Федерации?

    • Простое агентское соглашение – это соглашение, по которому принципал может продавать товары через несколько агентов по продажам в России.
    • Агентское соглашение с эксклюзивным правом продажи – это соглашение, по которому принципал обязан продавать товары только через назначенного коммерческого агента и не может предложить тот же продукт другим коммерческим агентам на протяжении действия этого соглашения.
    • Агентское соглашение с преимущественным правом на продажу– это соглашение, по которому принципал обязан предложить товары в первую очередь своему агенту, и если агент отказывается принять товар, принципал имеет право предложить его другим коммерческим агентам. 

    Каковы обязанности агента в соответствии с Гражданским Кодексом??

    В соответствии со статьей 974 Кодекса, агент имеет следующие обязанности:

    • лично исполнять обязанности, возложенные на него по агентскому договору;
    • сообщать информацию о ходе исполнения агентского договора по просьбе принципала;
    • передавать принципалу всю информацию о полученных средствах в соответствии с исполнением договора;
    • вернуть действующую доверенность после окончания действия агентского соглашения.

    Какие обязанности у принципала??

    • предоставить агенту доверенность на совершение юридических действий;
    • возместить агенту его расходы;
    • предоставить агенту средства, необходимые для исполнения соглашения;
    • принять исполнение обязанностей агента;
    • оплатить работу агента..

    Как согласовывается вознаграждение агента?

     Размер и детали выплаты вознаграждения агента зависят от договоренности сторон в агентском соглашении. Если договор не предусматривает механизма оплаты, вознаграждение должно быть эквивалентно подобному виду услуг в сравнимых обстоятельствах (статья 424 (3) Гражданского кодекса).

    Существуют ли какие-либо ограничения на конкуренцию во время действия агентского договора?

    В соответствии со статьей 1007 Гражданского Кодекса агентское соглашение может предусматривать ограничения со стороны как принципала, так и агента. Договор может наложить обязательства на принципала не заключать подобных агентских соглашений с другими агентами, действующими на территории, определенной в договоре; или воздержаться от самостоятельной деятельности на этой территории, если она аналогична деятельности, которая является основой агентского договора.

    Агентское соглашение может предусматривать обязательство для агента не заключать  аналогичных контрактов с другими принципалами на территории целиком или частично  совпадающей с указанной данном соглашении. Следует, однако, отметить, что ограничение на конкуренцию не должно влиять на клиентов. Принципал  не может ограничивать агента в продаже товаров или оказании услуг исключительно определенной категории покупателей  или покупателей, проживающих только на территории действия соглашения. Такие условия агентского договора будут считаться недействительными (статья 1007 (3) Гражданского Кодекса).

     Могут ли вышеуказанные ограничения применяться после того, как срок действия агентского договора прекратится?

    Гражданский Кодекс не предусматривает продолжения ограничений после того, как срок договора истек, или он был прекращен досрочно. Однако, стороны могут наложить некоторые ограничения на конкуренцию на определенный период после истечения срока действия договора.

    Но что если агент зарегистрирует товарный знак принципала в России и/или будет подделывать товары принципала, не раскрывая своей деятельности перед заказчиком?

    Гражданский Кодекс предусматривает, что правообладатель имеет исключительное право использовать зарегистрированный товарный знак для «товаров, этикеток, упаковок, которые производятся, предлагаются к продаже, продаются, демонстрируются на выставках и ярмарках или используются в коммерческих целях в России, либо хранятся и транспортируются или ввозятся в Россию для этой цели; при выполнении работ и оказании услуг по документам, представляющим товары в торговле».

     

    Таким образом, любое несанкционированное использование охраняемого товарного знака считается нарушением. Кроме того, товары, этикетки и упаковки, на которых товарный знак незаконно размещен, будут рассматриваться как подделка.

     

    Какие средства правовой защиты имеет принципал в соответствии с законодательством Российской Федерации?

    Четыре типа судебного иска могут быть приняты в отношении нарушителей товарных знаков и/или агентов, незаконно их использующих.

     

    А) Административное производство

    Незаконное использование товарного знака влечет за собой административные последствия, которые включают изъятие контрафактной продукции и штрафы в размере:

    ·        Для физических лиц – двойная стоимость поддельной продукции, но не менее 10,000 рублей;

    ·        Для юридических лиц – пятикратная стоимость контрафактных товаров, но не менее 100,000 рублей; а также

    ·        Для должностных лиц – тройная стоимость продукции, но не менее 50,000 рублей.

     

    Б) Гражданское производство

    Принципал может претендовать на следующие средства в гражданском иске:

    ·        Прекращение разрешенного использования товарного знака;

    ·        Возмещение убытков;

    ·        Удаление всех поддельных товаров с рынка и их уничтожение;

    ·        Компенсация ущерба в размере от 10,000 до 5 миллионов рублей .

    В) Уголовное производство

     Принципал может открыть уголовное дело, но только в случае, если нарушение происходит повторно, или если ущерб превышает 250,000 рублей. Уголовные санкции включают в себя:

    ·        Штраф в размере от 100,000 до 300,000 рублей, или заработная плата за 2 года или иной доход осужденного;

    ·        Принудительная общественная работа до 480 часов;

    ·        Исправительные или дисциплинарные работы на срок до двух лет; а также

    ·        Лишение свободы на срок до двух лет со штрафом в размере до 80,000 рублей или до шестимесячной заработной платы или иного дохода осужденного.

    Обратите внимание, что принципал может потребовать возмещения ущерба от агента. Он может инициировать гражданский иск в пределах компетенции уголовного дела.

    Итак, каковы сроки действия и условия прекращения агентского договора?

    Агентское соглашение может быть заключено на любой определенный срок или на неопределенный срок (статья 1005 (3) Гражданского Кодекса). Таким образом, стороны свободны принять решение о сроке действия договора. На практике, агентские договоры чаще всего заключаются на неопределенный срок, и стороны имеют право в одностороннем порядке расторгнуть договор.

    Срок уведомления о прекращении агентского сотрудничества должен быть не менее 30 календарных дней (статья 977 (3) и статья 1004 )1) Гражданского Кодекса.

    Теперь, когда соглашение расторгнуто, имеет ли агент право на компенсацию?

    Нет. Российский закон не устанавливает какой-либо компенсации или возмещения при прекращении действия агентского договора.

      


    _1} http://legislationline.org/documents/section/criminal-codes/country/7


    The Civil Code of the Russian Federation; Russia (Federation), Peter B. Maggs, Aleksei Nikolaevich Zhiltsov, First Part, page 74-77

     

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    Mon, 20 Jun 2016 02:00:00 GMT
    <![CDATA[Кто кого обманывает? Борьба с подделками в контексте ОАЭ]]> Кто кого обманывает? Борьба с подделками в контексте ОАЭ

     

    "Если покупатели хотят быть снобами, закон будет защищать их в их снобизме. i"

     

     Потребительская промышленность требовательна и особенно, когда это относится к товарам роскоши, продаваемой по розничной цене. Мало кто упустит возможность приобрести роскошную вещь по доступной цене. Тактика навязывания товара – это обычное явление представления «самой выгодной покупки» популярных брендов роскоши. В словаре юристов, эти «выгодные покупки» более известны как контрафактные товары, и независимо от того, насколько это выгодно, иметь с ними дело является уголовно наказуемым преступлением.

     

    Три важных предупреждения от юриста в данной связи возможно будут: а) предупреждение о здоровье – товары могут быть действительно опасны во многих случаях, особенно поддельная кожа или, даже больше, поддельные лекарства; б) моральное предупреждение – контрафактные товары имеют косвенное влияние на работу многих, потерю прибыли для владельцев; в) третье и наиболее важное юридическое предупреждение – контрафактные товары являются незаконными во многих, если не во всех юрисдикциях.

     

    Контрафактные товары последовательно находят многие способы, чтобы обойти своих соперников – настоящие, дорогие и оригинальные товары. Ранее традиционные рамки были ограничены мелкими розничными магазинами и серыми рынками, но интернет открыл множество возможностей для подделок. Это увеличение распространения на онлайн и оффлайн рынках оказало сильное влияние как на макро, так и на микро уровне. Сложность для нелегальных торговцев состоит в том, что контрафактные товары в больших количествах не могут быть ввезены в страны, кроме нелегальных способов ввоза. Контрафактные товары деформируют экономику и бесполезно растрачивают ресурсы. Рынки наполнены поддельными товарами, уклоняясь от уплаты таможенных сборов и взносов, причитающихся государству. В свою очередь, государство теряет часть своего дохода. Такие товары отличаются по качеству от оригинальных. Они портятся и теряются форму быстро, не служат своей цели, и выбрасывают деньги покупателей на ветер. Если ущерб от контрафактной продукции ограничивается физическими потерями, это может быть поправимо, но основная проблема заключается в подделках продуктов питания, медикаментов, косметики и автомобильных запасных частей, которые в случае производства не по соответствующим стандартам, могут повлечь за собой травму или смерть.

    Через границы государственные механизмы получили импульс в борьбе с торговыми практиками контрафактных товаров. В дополнение к различным государственным законодательствам, международные договоры, как Международное Соглашение по Борьбе с Контрафактной Продукцией (ACTA) приобрели значение. В утверждении СМИ официальное лицо из Управления по Коммерческому Соответствию и Защите Прав Потребителей (CCCP) в Дубае сообщил, что в рамках борьбы против контрафактных товаров было конфисковано 3,5 миллиона поддельных товаров в 2015 году. Объединенные Арабские Эмираты гордятся упорядочиванием принципов законодательства и усилением механизмов по борьбе с поддельными товарами. Это возможно в свете следующих законов:

     

    I.             Федеральный Закон №4 от 1979 года по Борьбе с Мошенничеством и Махинациями в Торговле регулирует коммерческие махинации и наказания за них. Статья 1 предусматривает наказание любого, кто совершает обман или мошенничество партнера по договору. Статья 2 предусматривает уголовную ответственность за махинации в продаже продуктов питания, медицинских препаратов, сельскохозяйственных продуктов, натуральных продуктов и других. В этой статье подчеркивается наказание, если эти продукты вредны для здоровья. Статья 3 предусматривает уголовную ответственность лицу, обладающими данными товарами. Статья 4 запрещает импорт контрафактных товаров. Этот закон дает право Министерству Экономики и Коммерции уничтожать такие продукты за счет импортера, если он/она не реэкспортирует их обратно источнику до установленного срока. Статья 6 гласит, что должностные лица, назначенные на подобные преступления должны доказать нарушения Закона о Махинациях и Мошенничестве. Статьи 7-13 относятся к процедурам по установлению, нарушают ли совершенные правонарушения положения закона и соответствующие меры.

     

     

    II.              Федеральный Закон №37 от 1992 года в отношении Товарных Знаков определяет товарный знак как любой знак или указание, установленный предпринимателем, производителем или владельцем услуг для того, чтобы отличить свою продукцию от другой. Закон предусматривает уголовную ответственность за подделку, фальсификацию, имитацию товарных знаков и регулирует их регистрацию, передачу права собственности, залог товарных знаков, лицензионные договора на их использование, а также товарные знаки, выделенные для Контроля и Инспекции определенных продуктов. Кассационный Суд Дубая в деле 114 2008 года в слушании 9 сентября 2008 года, постановил:-

     

    "Имитацией товарного знака является изготовление знака, похожего в своем внешнем виде на оригинальный в степени, достаточной, чтобы ввести в заблуждение потребителей, на которых направлены торговые знаки, и вызывающие путаницу между оригинальным брендом и подделкой. Цель товарного знака является различение конкретных товаров или продуктов, чтобы избежать путаницы между ними, и чтобы общественность не была сбита с толку и введена в заблуждение. Эта цель достигается за счет разницы между знаками, которые используются для различения конкретных товаров или продуктов, когда путаницы между ними не существует, и потребители не введены в заблуждение и запутаны."

     

    III.            Федеральный Закон №18 от 1981 года с поправками, внесенными Законом №14 от 1988 года, относительно организации Торговых Агентств Статья 1 определяет Торговое Агентство как «представительство принципала агентом с целью распространения, продажи, демонстрации или предоставления товаров или услуг.» Закон требует регистрации коммерческого агентства в Министерстве Экономики и Коммерции.

     

    IV.              Федеральный Закон №24 от 2006 года о Защите Прав Потребителей определяет потребителя как любое лицо, приобретающее товары/услуги для удовлетворения личных или иных потребностей. Закон обязывает поставщика вернуть или заменить любые товары в случае каких-либо дефектов, обнаруженных потребителем при условии, что возврат или замена происходят в соответствии с законом. Что касается рекламы, «поставщик не должен предлагать, представлять, продвигать или рекламировать любые дефектные, поддельные, поврежденные или вводящие в заблуждение товары/услуги, которые могут навредить потребителю». В статье 8 подчеркивается необходимость записывать цены товаров, где «поставщик должен отображать цену в ясной форме или видном месте на полках товаров». Потребитель может получить датированную накладную, которая включает тип и цену товара вместе с любой другой информацией, указанной в Исполнительном Распоряжении этого закона. Что касается услуг, предоставляемых поставщиком, Статья 13 предусматривает, что «поставщик услуг должен гарантировать потребителю период времени, который соответствует характеру услуги, в противном случае поставщик услуг должен либо вернуть сумму, уплаченную потребителем, либо предоставить услугу повторно надлежащим образом. Исполнительные Распоряжения этого закона определяют гарантийный срок в соответствии с типом услуги."

     

    Недавно Федеральный Национальный Совет одобрил федеральный проект закона, касающийся коммерческого мошенничества, который распространяется также на свободные экономические зоны. Проект закона определяет коммерческий обман как импорт, экспорт, производство, продажу, хранение, аренду, маркетинг и иное дело с контрафактными товарами, объявление неправдоподобных скидок, размещение коммерческих рекламных объявлений, вводящих в заблуждение, и продвижение контрафактных товаров/услуг. Наказания включают в себя тюремное заключение и штрафы до одного миллиона дирхам.

    Кассационный Суд Дубая установил принципы по борьбе с коммерческим мошенничеством, постановив, что злой умысел должен быть доказан, чтобы установить преступление; изначально предполагаются положительные намерения, пока не доказано обратное. Положение относится к статье 5 Закона №4 от 1979 года, который запрещает предпринимателям, торговцам и производителям совершать следующее:

     

    • Сознательно использовать поддельный товарный знак
    • Любые действия, которые могут вызвать путаницу между названиями конкурентов, продуктами, или промышленной или коммерческой деятельностью.  

     

     

    Страны Совета по Сотрудничеству Стран Персидского Залива (GCC) готовятся запретить импорт всех электрических расходных материалов низкого качества или дешевых материалов, которые не соответствуют требуемым условиям ввоза и угрожают безопасности потребителей. Страны Персидского Залива согласились принять единый список всех электрических приборов, которые не могут быть импортированы, в том числе холодильники, стиральные машины, телевизоры и обогреватели, которые являются вредными для окружающей среды. Разрешения будут выдаваться только импортерам товаров высокого качества и подходящим под определенные положения. В течение шести месяцев регулирующие органы готовятся начать интенсивные рыночные кампании по изъятию товаров, которые нарушают правила. Финансовые санкции будут наложены на нарушителей.

    Для того, чтобы свести к минимуму и, возможно, искоренить контрафактную продукцию, борьба с ней должна включать законодательные законы, поддерживающиеся средствами массовой информации, письменными и устными. Потребительские руководства должны быть созданы с указанием, как отличить оригинальные продукты от их подделок и, в дальнейшем, подчеркивающие важность взаимодействия с надежными магазинами и поставщиками. Это позволит не только сохранить деньги, потраченные потребителем, но и защитит его здоровье и жизнь.


    [1] A similar decision was passed by Dubai Court of Cassation in Case number 242 of 2009 heard and decided on 29 December 2009

    [i]   Benton Announcements Inc. v. FTC, 130 F.2d 254, 254 (2d Cir. 1942) (Per Curiam) through Robert Pfeffer, 'Who's Fooling Whom: An Economic Analysis of Expressive Trademark Use'; Volume 6, Number 1, 2006, Wake Forest Intellectual Property Journal

     

     

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    Wed, 18 May 2016 04:41:00 GMT
    <![CDATA[Trade Finance]]> A documentary credit or a letter of credit is usually used to finance international trade. Judges have referred to documentary credits as the "life blood" of international commerce. Most documentary credits in international transactions are governed by the International Chamber of Commerce (ICC) Uniform Custom and Practice for Documentary Credit 500 and 600. In the United Arab Emirates (UAE), documentary credits are governed by Federal Law No. 18 of 1993, the Commercial Transactions Law. The provisions relating to documentary credit are contained in section 4 of chapter 3 of the Federal Law number 18 of 1993 Commercial Transactions Law and are not mandatory rules but rather complementary to the parties' intentions. As per the Court parties to a documentary credit are free to choose the ICC Uniform Rules and Practices for documentary credits instead of the Commercial Transactions Law rules.

    Before understanding the legal obligations of the parties involved in documentary credit transactions it is better to comprehend the terminologies associated with the transaction. A documentary credits is a contract whereby the bank (the Issuing Bank) undertakes to open a credit at the request of one of its customer (the applicant/buyer), for a certain amount and for a specified period, in favor of another person (the beneficiary/seller), secured by documents which represent the goods that is shipped or being prepared for shipment (Article 428).

    Usually four parties are involved in the context of documentary credits transactions, namely: the buyer-applicant, the Issuing Bank, the seller-beneficiary, and the Correspondent Bank (confirming / advising and / or negotiating the Letter of Credit) (the Correspondent Bank). The credit must be in compliance with the sales contract signed between the buyer and seller prior to the opening of the documentary credit, otherwise the seller may be entitled to reject it.

    After opening the credit, the Issuing Bank informs the beneficiary directly or through a Correspondent Bank in the country of the beneficiary. The Issuing Bank may ask the Correspondent Bank to either advise the beneficiary (in this case correspondent bank may not be obliged to make any payment to the beneficiary) (Advising bank); or advise and add its confirmation to it (in this case the correspondent bank can be held responsible for making payment to the beneficiary and called Confirming bank). Once the advising bank has confirmed the documentary credit, it will refuse to accept any instructions to the contrary from the buyer.  In Hamzeh Malas and Sons v. British Imex Industries Ltd 1958 2Q.B. 127, the buyer sought an injunction against the seller to restrain the later from withdrawing the purchase price on a confirmed letter of credit. The English Court of Appeal held that "a vendor of goods selling against a confirmed letter of credit is selling under the assurance that nothing will prevent him from receiving the price".

    TYPES 

    The documentary credits are of several types bearing different legal implications, however, in this article we will address the types specifically mentioned in Commercial Transactions law i.e. revocable or irrevocable.

    Revocable

    In revocable documentary credit, the bank can, at any time, amend or cancel the documentary credit on its own initiative or at the request of the buyer and shall not involve any liability by the bank towards the beneficiary (Article 431 (2)). In absence of any clear indication, the documentary credit would be irrevocable (Article 431). Thus the assumption of irrevocable documentary credit in UAE is in contrast to the applicable laws in the Gulf and internationally which expressly state the stipulating type as revocable in absence of any express mention about irrevocability.

    It is worth mentioning that Article 431 (2) may be disadvantageous to the buyer and the banks in the UAE as the bank is responsible to pay the beneficiary-seller even if the fraud is committed by the seller on buyer as the parties under letter of credit do not physically verify the contents of goods and have no such right thereby relying completely on documentary transactions. The obligation of bank under the irrevocable documentary credit is elaborated below. Moreover, if the documentary credit is confirmed by the bank in the country of the beneficiary, it will enable the beneficiary to deal exclusively with a local bank, known to the beneficiary. It is therefore recommended to amend the law and bring it in line with the applicable laws in the Gulf and other international trade laws. 

    Irrevocable  

    An irrevocable documentary credit constitutes a definite undertaking by the bank which is conclusive and direct towards the beneficiary, provided the conditions therein are complied with (Article 433 (1)). As per Article 434 (1), the liability of the bank shall continue notwithstanding the instructions by the buyer to cancel the documentary credit. The bank therefore cannot amend and withdraw the irrevocable documentary credit under any circumstances (Article 433 (2)). It thus represents a direct relationship between the beneficiary and the bank and the right of the beneficiary against the bank is not harmed by any dispute between the buyer and seller to the contract of sale. Irrevocable documentary credit is therefore more advantageous to the seller as it gives more security in terms of payment.

    PRINCIPLE OF AUTONOMY

    Documentary credit is considered a separate contract than the underlying sales contract under the principle of Autonomy. It is the key principle governing documentary credits thereby assuring commercial utility of documentary credits since centuries. Accordingly, documentary credit is considered as an independent transaction from the contract for which it is opened and the bank shall remain independent of such contract (Article 428). The Issuing Bank undertakes the liability of the buyer towards beneficiary without involving itself in the underlying transaction between the buyer and the seller. The Issuing Bank will pay to the benficiary without condition if the beneficiary fulfils the documentary obligations based on terms mentioned under the documentary credit, regardless of the disputes, if any, connected to the underlying contract between the buyer and seller. The specific claim under the underlying sale contract is considered separately. The seller's breach of the terms and condition (i.e., with respect to quantity, quality, delivery, date, etc.) of sale contract does not entitle the buyer to instruct the Issuing Bank to stop payment under the credit or does not grant authority to issuer and / or Correspondent Bank (the paying bank) to withold payment.

    Courts are quite reluctant to grant injunctions ordering a bank to withhold payment, unless there is a clear indication of fraud, it was held that documentary credit was aimed at providing security to both the seller and buyer in international business transactions. The bank therefore cannot cancel the credit without taking into consideration the parties' interests.

    The autonomy of the documentary credit can therefore be considered as an advantage in international sales as it serves as a commercial assurance to parties in international trade based in different countries. If banks were allowed to refuse to pay under a documentary credit, whenever trading parties had a dispute, the vital flow of international trade would have been blocked.

    THE DOCTRINE OF STRICT COMPLIANCE

    The second fundamental principle of documentary credit practice is the requirement that documents are strictly complied with the terms and condictions of the documentary credit (Article 430). Documents are considered compliant to the terms if they are complete as described in credit and are devoid of obvious defects.

    Seller's obligations

    The obligation of the seller or beneficiary is to tender the stipulated documents in accordance with the terms of the documentary credit usually to the issuing/Correspondent Bank. These documents are evidence of the fact that the goods have been shipped and dispatched. As per Article 433, the Issuing Bank assumes liability to pay at the time the seller delivers the documents to the bank before the expiry of the documentary credit. The documents submitted after the expiry period grants the bank authority to reject them unless the buyer requests his or her acceptance and the bank approves such request (Article 435).

    Bank's obligations

    Once the documents are tendered, as per Article 435, the bank is under an obligation to insure that the required documents are exactly in accordance with the terms and conditions of the documentary credit, and that they correspond with each other. Once the bank is assured, it shall make the payment (Article 430 (2)).

    If the documents do not comply with the documentary credit, the Issuing Bank shall reject them. It may also send them to the buyer for approval as soon as possible. Otherwise, the issuing/Correspondent Bank (referred to as Paying Bank, wherever applicable) will be deemed to have accepted the documents and will be liable to pay. Further, the Paying Bank will not be able to recover the amount paid to the beneficiary towards the documentary credit. The Paying Bank will be responsible to the buyer for deductions from the buyer's account and entitle for damages. Once the bank accepts the documents, it shall urgently transfer them to the buyer and pay to the beneficiary; and if the bank rejects them, it shall immediately notify the beneficiary and the buyer. The bank must provide reasons for such rejection (Article 437). 

    However, banks are not under any obligation to check whether such documents represent the goods in question. The bank's obligation is restricted to examining that the presented documents are the exact documents required under the documentary credit. The rationale behind this strict, uncompromising, doctrine is the notion that banks are financiers and not traders. They are not – and cannot be expected to be – familiar with the commercial elements of their customers' business activities. Accordingly, banks should not be dragged into disputes respecting the conformity of goods supplied. As long as the Paying Bank adheres to strict compliance principle when it examines the documents tendered under the documentary credit, it remains within the ambit of its contract with the applicant for the credit.

    However, the seller may send defective goods (so long as this does not amount to a clear fraud) and yet present conforming documents. A rigid application of the doctrine of strict compliance may therefore lead to results that would, on many occasions, be regarded as both unfair and unsound by the business world in general.

    Buyer's obligations

    The buyer's obligation is to refund to the bank the amount paid to the beneficiary within the limits of the opened credit along with the expenses, which the Issuing Bank has incurred in this respect. If the buyer fails to pay the value of the documentary credit to the bank within one (1) month from the date of being notified of the arrival of such documents, the bank has the right to have a lien on the goods represented by the documents and can sell the goods. If the goods are destroyed or become damaged, the right of mortgage/lien shall pass to the insurance amount (Article 439).

    Conclusion

    In view of the above, documentary credit transactions demand trust towards banks by both the buyer and seller to remain confident that Issuing or Correspondent Banks will respect their payment commitments. Documentary credit could not function if the buyer and seller lacked confidence that the banks would honour their obligations irrespective of their instructions thereby making prinicple of autonomy the most significant practice serving as lifeblood for international trade and to some extent brigding the gap of trust and knowledge between the two trading partners unknown to each other at initial risk taking phase.

    ]]>
    Mon, 14 Mar 2016 00:00:00 GMT
    <![CDATA[Due diligence в горнодобывающей промышленности ]]>T
    he due diligence is sin qua non for the purposes of investments, acquisitions, joint ventures, partnerships or such other essential investment ventures. It provides rational assurance on the investment related to assessment, financing and purchase of assets. The mining companies, by its nature of exploration and mining launch itself or try to get into joint venture or other kind of co-operations with countries throughout world. These countries include not only developed nations but also diverse developing nations with political instability. Therefore companies interested in such financial ventures must only have their own legal team but hire local or international legal experts in mining industry. The local corporate and mining law scenario of the region is must to be complied with to start with the due diligence.   The investment in several countries and even regions in mining is very individualistic which differs from region to region. In view of the fact, this article recapitulates the due diligence for investments in mining sector and/or companies by way of essential legal safeguards which are generally considered and needs to be considered by investor and banker. The laws that play key role in the industry are foreign investment laws, mining laws, land and ownership laws including intellectual property, land development laws, corporate laws, trade laws, competition laws, taxation, employment laws, environment protection laws, consumer protection laws and most importantly administrative laws for curing the improper decision of government bodies who regulate all the activities.    A. Preliminary legal checks:  1. Title: The license term and security of tenure of such titles needs to be ensured. Another factor is right to assign, pledge, transfer such license/title and finally alienate it. Further, reliability of title, lease term and control are the pertinent aspect which requires deliberation. The state may retain ownership of certain minerals irrespective of ownership of the land. Surface estates are severed from mineral estates in certain circumstances by conveyance or reservation of these rights including royalties, leases, bonus or rents. The consideration of mineral estate rights needs to be contemplated. Usually the essential elements includes right to use, to convey rights, lease bonus or consideration, to receive delay rentals and royalties.   Some countries offer split estate which means mineral and surface ownership is different. Due to this provision the explorer need not invest in surface land and only pay for mineral rights and estate. These laws are considered pro-mining as most of the time mineral rights are only leased and not owned. The split ownership is financially efficient way for miner as they can move on to next location without any lockage of capital in non viable region.  Government lands are leased by some governments on the basis of proof of exploration activity by mining companies. Further exploration activity proof or report is sought by government to maintain the mineral license.  Consequently, legal structure must be made to ensure that the mining companies are not left with permits and licences that are open to questioning and at mercy of government or local companies who desire to claim ownership over successful exploration project.   2. Corporate concerns:    Inaugural corporate structural concerns, authorization and permits required are major concerns. Insurance criteria and tax regime of the country and region are important factors. The checklist includes the rights of foreigner individually or as body corporate to establish new company and to acquire, alienate or pledge property. The corporate structure may also include assets owned or operated by decisive individual and hence requirement of any separate management or relationship agreement with that individual to clarify management issues. In some regions, Joint ventures are only means of accessing the market, production facilities, ownership of material including raw materials, so on and so forth.   3. Environmental laws:    It requires standards to be followed with respect to explorations permits, waste disposal, and methodology to reduce risk of pollution. Regulatory checks by environment departments and penalties for non compliance are unavoidable aspects of mining ventures. Further extension of permits plays vital role in continued viability of project. The exemplary example on it is Fraser Island case wherein the export permit was cancelled due to raising environmental concerns and thereby destroyed the investments rendering the project non viable.   4. Dispute resolution:    Dispute resolution forums available in the region and the laws governing investment and other agreements allow or deny access for forum shopping or neutral forum to resolve issue. In this area the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention), 1965, can be called upon as it capacitate for conciliation and arbitration of investment disputes between a contracting State and nationals of other contracting States. However, the State must be party to it. The local remedies must be exhausted before submitting to ICSID jurisdiction. The substantive law can be chosen in terms of governing law of the contract and recourse to the procedural rules of ICSID Convention and arbitration rules is standard measure.    In other instances where the parties are private individuals or companies the options of dispute resolution are (i) judicial system of state wherein the mining operations are carried out; (ii) international arbitration disputes resolution forums such as ICC International Centre for ADR (iii) other alternate dispute resolution forums such as Chamber of Commerce and Industry of various countries which provide for arbitration forums, Arbitration forums such as Dubai International Arbitration Centre (DIAC), Abu Dhabi Commercial, Conciliation and Arbitration Centre ("ADCCAC") so on and so forth. It needs to be considered that following aspects of arbitration must be taken into account by parties such:    i. Proper law of contract between the parties (substantive law i.e. lex contractus); ii. law of arbitration agreement and the execution of that agreement (lex arbitri); iii. seat of arbitration (as that have impact on procedural laws of arbitration also called as lex  loci arbitri); iv. law governing the recognition and enforcement of arbitral award.   5. Intellectual property:    Intellectual property right may also have impact on title/license and/or mine development. The mining industry being highly competitive any idea of changes in efficiency through new process which results in time efficiency, energy efficient, larger output, so on and so forth is worth protecting as competitors may adopt it and gain edge over the creator. The patents are highly used for revenue purpose for granting license and generating revenue. Thus intellectual property can be considered as good revenue generator and protecting interests.   6. Trade Laws:    Under trade laws it is imperative to note whether export and / or import requires specific approvals and the duties applicable on such trade. The "Fraser Island Case" reported as Murphyores v Commonwealth of Australia (1976) 136 CLR 1 is an example of how trading permits, change in environmental laws and change in political as well as social scenarios can impact the mining industry. In this case the two mining companies carried on mining of rutile from Fraser Island which had no market and hence depended on shipping the same to export markets. The mining operations were carried on pursuant to a valid mining concession issued by the State of Queensland in compliance with all the laws applicable. Due to raising environmental concerns the company's further export permit was withhold by administrative order. The case was finally decided in Australian Supreme court by rejecting the company's argument of environmental considerations being relating to mining of a commodity could not be properly taken into account by the Federal Government, as a matter of administrative law, in deciding whether to grant export permits for that commodity even though export was exclusive federal power. The companies owned their mining concessions and production facilities which could be operated and carry out mining operations however their access to export market was blocked which hampered their investment. The conflict mineral trade laws are being introduced and a consideration being made by many states to introduce such laws needs to be reflected upon as it will impact imports of conflict minerals in various nations. Further the government would identify those commercial goods that could contain conflict minerals, approve a list of independent monitoring groups qualified to audit the worldwide processing facilities for these minerals, and eventually restrict the importation of minerals to those from audited facilities. The customs declarations by the importers must certify that the goods "contain conflict minerals" or are "conflict mineral free" based upon this audit system.    B. Financial Considerations:  1. Cost and general Analysis:    The Cost analysis includes estimation of annual production capacity of company, cash flows in terms of working capital requirements and attributes of such capital, capital expenditures, mine supply cost, equipments cost, license/lease cost, off site transport cost, market accessibility and transportation cost. Construction time costs are essential financial evaluation. Ongoing cost of replacing worn out equipments throughout the productive life of mining operations should be assessed as the equipments though considered assets are worn out and depreciation is considered. The metal classification stating type of metal or ores such as precious, base or minor section is considered to estimate the cost recoverable on the market value of such minerals as the viability of project depends on it. For instance gold mines shares are valued on the basis of their anticipated profits through the life of the mine and these depend on the reserves, and on the relationship between gold mining production costs and the anticipated value of the gold extracted. Income statement will probably display expenditure  under the headings of exploration expenses and administrative expenses. Statement of Financial Position i.e. balance sheet detailing the assets and liabilities of the company at the end of the year is studied to see financial condition of the company.    2. Taxation laws:  This needs apparent consideration in any investment. It is indispensible in any investment consideration and mining sector is not an exception to it. Study of taxation on ownership and transfers of various assets is essential in terms of final profits receivable.    3. Other factors:  Securities with special rights shares issued by earlier company must be considered as key factor. Economies of the metal market, their forecast behavior and transportation cost to the export markets is one risk factor to be scrutinized.   C. Geological factors:  The mining operations are depended on the resources available. Though historically it is proved that geology is not only enough however it is undisputedly one of the aspect majorly considered and hence geological due diligence is conducted in mining sector.   All mining activity takes places within the Earth's crust. The distribution of metals within the crust can be seen by the differences in the types of material. The concentrations of such material are mined and sold at profit which is the basic purpose of mining operations. Therefore the concentration factor of material should not be undervalued as it determines the value of mining company. The company with lower grade of ore will possibly incur greater cost in order to obtain the given amount of economically valuable material whereas on same cost the company working on precious metal mine field recovers cost more quickly due to high market value of explored material.    D. Reporting: Various countries have annual reporting or on demand report requirements: 1. UK / Western Europe: The 'Reporting Code – Institute of Materials, Minerals and Mining (IOM) 2. Canada: Canadian Institute of Mining, Metallurgy and Petroleum - CIM Guidelines (National Instrument 43-101) 3. USA: Society for Mining, Metallurgy and Exploration - SME GUIDE 4. Australia and New Zealand: Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ('the JORC Code')- Joint Ore Reserve Committee 5. South Africa: SAMREC Code - South African Mineral Committee - Reporting Standard And Format Of Mineral Resources And Mineral Reserves 6. Chile: Certification Code 7. Philippines: Geological Society of the Philippines   Such reporting obligations usually lay down standard recommendations and guidelines for public reporting of mineral exploration results, mineral resources and reserves. Public report may vary as per the Countries reporting standards however it may often include company's annual financial report, quarterly reports, reports to stock exchange as required by law, expert reports or all publically released information.   The list is not exhaustive as the sector is extensive covering technical and critical considerations of finance. The risk factors which add to the substance of the due diligence such as employment laws, governmental risks including above factors are further exhaustive. The large sectors like mining needs larger scope of due diligence than general financial due diligence as stated in above fields.       ]]>Wed, 20 Jan 2016 12:00:00 GMT<![CDATA[Dubai Design District (D3) ]]> "We'll build a city dedicated to support entrepreneurs in Dubai. I invite the Arab youth to join the march of innovation and entrepreneurship," his Highness Sheikh Mohammed bin Rashid al Maktoum, Vice President of the United Arab Emirates (UAE), Prime Minister and Ruler of Dubai asserted. Just when you think Dubai had reached its optimum position in the Middle East and the world by - and amongst its many impressive achievements - building the world's tallest skyscraper and having the world's number 1 airport… it enters the world of art and design. According to architectural designer Mark W. Perrett, "doctors save lives by constructing a healthy life [and] designers save lives by constructing a life worth living." What better way to nail this ever true statement than by dedicating over 25 million square feet to a purpose-built community aimed at endorsing and fostering the local, regional, and global, growing art, fashion, and design arena? Welcome to the Dubai Design District, better known as d3.

      Located in the vibrant heart of Dubai and minutes away from Dubai's Business Bay, Downtown Dubai, Dubai International Financial Centre (DIFC), and Dubai International Airport, d3 seeks to unite the world's most creative minds in a world class community dedicated to many aspects of art and design, from architecture to fashion to film; becoming the region's beating heart of design.    Upon the announcement of d3, the Prime Minister and Ruler of Dubai issued Decree No. 23 of 2013, forming the Dubai Design and Fashion Council that is supported by the Dubai Technology and Media Free Zone Authority (DTMFZA). Article No. 3 of the decree outlines the objectives of the Executive Council which include promoting Dubai as a central hub for fashion and design, stimulating tourism and commerce in the emirate, and fostering local talents.    Considered to be the first green city in the Gulf and the second in the world, d3 is composed of a wide mixture of office spaces, boutiques, and ateliers, including - and not limited to - a Museum Institute, hotels and residential areas, and an amphitheatre.   We present to you a brief outline regarding setting-up in d3.    Set-up Benefits 1:    - Dubai's retail sector is the second most important retail market in the world. - The Dubai 2021 Plan and EXPO 2020 will stimulate growth in Dubai including its fashion, design, and luxury sector. - Setting up a Freezone Limited Liability Company (FZ LLC) includes 100% foreign ownership, 100% repatriation of profits and capital, and zero tax. - Simple legal framework. - Ideal location in Dubai with flexible access to the Middle East North Africa (MENA) region.   Licensing 2: d3 offers the opportunity to operate as a Freezone entity or as an on-shore company and also provides freelance permits to individuals. The different types of Freezone licenses are: 1. FZ LLC, 2. Branch of a UAE Company, 3. Branch of a foreign company, and 4. Freelance permit.   Specifics regarding license categories for d3 are outlined in Decision No. 2 of 2013, noting that commercial licensing affairs are regulated by the Department of Economic Development (DED). Setting up in d3 may carry several advantages. For instance, if your company was set up in free zones administered by TECOM or DIFC, you are permitted to move into d3. Additionally, d3 offers a dual license system where bodies set up in d3 have the opportunity to apply for two licenses, permitting them to operate from within d3 and in mainland Dubai.   The d3 team has simplified and eased the process of applying for a license. Beginning with an online application (www.dubaidesigndistrict.com) followed by interacting with account mangers and legal advisors that aid you through the process, licenses can be completed within a couple of weeks.    Notable Set-up Costs:                       Setting up a FZ LLC or a Branch Establishment      Type                                                        Fee(s)   Commercial License    AED 15,000    Registration   AED 3,510      MinimumCapitalRequirements  

      - FZ LLC: AED 50,000

      - Branch Establishment: None 

      Office Space(s) (Prices include a  service        charge but exclude DEWA    and A/C    charges which are paid        separately) 

      - Courtyard View: AED 100/sq. ft.

     - Standard View:  AED 130/sq. ft.

     - Burj View: 165/sq. ft. (Office deposit      equates to a three months' that will be    adjusted to the  rental of the office) 

    Dubai Design District appears to be a promised dream, especially for local talents and future generations in the MENA region. Dubai has outdone itself in many aspects and we look forward to the ultimate completion of this project that will nurture the creative and cultural portions of the emirate, country, and region. 

                                                                                                                                                                                                                                                                                                                                     Mennat K. Khalil 

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    Wed, 30 Dec 2015 12:00:00 GMT
    <![CDATA[Споры по Закону Коммерческого Агентства]]>

    We have already highlighted in a previous article1  the fact that the Federal Law no. 18 of 19812 , also known as UAE Commercial Agency Law (the Law), has a protectionist approach favoring the Agent, defined therein as "A natural person holding the nationality of the state, or a juridical person owned fully by national natural persons, entering into contract of commercial agency for representation of the Principal in the distribution, sale, display or offer of a merchandise or service inside the state in return for a commission or profit", and further more imposing on its article no. 2 that "Carrying out the activities of commercial agency in the State shall be restricted to nationals or individuals or companies wholly owned by national physical persons". Therefore spreading awareness amongst foreign individuals or companies about certain important legal provisions before entering into an agency agreement is of major importance. 

      According to its protectionist approach, the Law reserves one hundred percent of the pursuit of the activity for the national citizens or companies of the United Arab Emirates. However, and being that the country's populations is constituted of 80% of expats it is important to state that articles 3 and 4 of the Law try to attribute some security to the Principal by providing that "the activities of the commercial agency in the State shall only be performed by persons whose names are inscribed in the commercial agents register (...), any commercial agency not registered in this register shall not be considered (...)" and "for the validity of the agency at the time of registration. The agent must be directly bound to the original Principal by a written and ratified contract".   In practice, the majority of the disputes arise due to the fact that the Principal decides not to seek legal advisory from an expert and prepares the agency agreements by himself in order to save money and time. To the extent that the international commercial principles are inspired by common law, and that the Principal is a foreign entity often unaware of the legislation applicable within the United Arab Emirates, the result is that a great number of agency agreements forwarded by clients to our office lack essential conditions, are not properly registered or simply provide that "should any conflict arise the parties agree that it should be referred to arbitration" when the agency law specifically mentions that in case of dispute the lawsuits should be addressed to the Courts.  However all those questions have already been largely studied and discussed, they are regulated by the applicable law and even the service court has already replied to the same questions in different occasions.    Nowadays, when it comes to agency agreements and disputes under the agency law, considering the economical crisis that the world is going through, the liquidation of the Principal can turn into a major issue since this event is not directly regulated by the law. Accordingly, what happens if the Principal goes into liquidation? What will be the consequences to the Agent and the agency agreement?   We will have to start by looking into the available legislation - the Federal Agency Law No.18/1981, the Civil Transactions Law (Articles 954-960); and the Federal Law No.8 of 1984 as amended by Federal Law No. 13 of 1988, the Commercial Companies Law.    Beginning with the Agency Law, it is important to mention that it is silent regarding the regulation, procedure, or consequences when the Principal in an agency agreement goes into liquidation. Under Article 8 of the said law, "the principal may not terminate the agency contract or refrain from the renewal thereof if there is no fundamental reason behind the termination or the refrain from the renewal" further stating that the agency contract cannot be re-registered before the Registry under the name of another agent, "even if the previous agency's contract was of definite term, unless the said agency has been rescinded upon the mutual consent of the parties, or should there be fundamental reasons behind(…)". We shall also mention that there is no definition under the law of what the fundamental reasons that might allow the Principal to terminate the agency contract or refrain from its renewal are, clearly leaving it to the discretion of courts and their judges to interpret the rule and to apply it to the facts in order to decide whether we are facing a fundamental reason or not.     Furthermore, the same article states that even if the agency's contract has a definite term, it demands mutual consent of the parties to rescind the agency. The legal obligation of compulsory mutual consent or the existence of a fundamental reason for the expiry of the agreement upon the end of the definite term, as well as the attribution of the settlement of any disputes to the courts are undoubtedly exceptions that demonstrate the perception of the legislator regarding the importance of these agreements for the economy and prosperity of trade and his intention to keep the pursuance of agency activities for nationals,  protecting  the agents, through the above referred legal mechanisms. However, the main question remains, could the liquidation of the Principal be valid reason for the termination of the agency agreement?   Before proceeding, there is also another article in the agency law that should be mentioned. As per article 9, termination may result in significant compensation awards in favour of the local agent. The stated article governs the payment of compensation to the agent upon termination or non-renewal of an agency agreement. As with termination under Article 8, the exact calculation of a compensation payment is not set out in the Agency Law (case law needs to be considered). This means that in case of liquidation of the Principal, the Agent will be entitled to any compensation?    The Civil Transactions Law also has an article regarding the termination of the agency agreement. Article 954 states that the agency agreement can only be terminated upon completion of what is delegated; upon the expiration of the fixed time; or upon the death of the Principal or the agent or their ceasing to have legal capacity.    Once again, despite having an extra article on agency agreements, the law is completely silent when it comes to liquidation of the Principal.   Finally, in 2008, the UAE Supreme Court's decision No.232 issued by its Commercial Section provided some guidance regarding the liquidation of the Principal. Accordingly, the Supreme Court decided that if a principal in an agency agreement goes into liquidation, the agency contract will come to an end and won't be valid anymore. During the liquidation period, under Article 294 of the Commercial and Companies Law, the Court will appoint a liquidator who will audit the company's accounts. The agent shall also submit all the invoices to the liquidator, after which the termination agreement can be signed between the Agent and the liquidator on behalf of the Principal. Afterwards, an application should be submitted to the Ministry of Economy to terminate the agency agreement.   Regarding the compensation of the Agent by the Principal, we are of the opinion that it should be awarded by the liquidator to the Agent if the liquidation was in any way the Principal's fault, however the credit should be considered as a common credit and be settled only after the payment of the privileged credits.    Thus, no mechanism of unilateral termination is established – even in case of liquidation. Accordingly, and having in mind the way the agency law has been designed, before signing an agency agreement we strongly recommend both the Agent and the Principal to consult a legal expert, as we are before an agreement whose exit can become very difficult, time consuming and the probability of not achieving a favorable decision in court regarding the termination or non- renewal of the agency agreement is high, given the existence of indeterminate concepts which must be interpreted and applied by the judge under his discretion power.   ]]>
    Fri, 25 Dec 2015 12:00:00 GMT
    <![CDATA[Upsurge of IPOs in the UAE: Legal Involutions ]]>"In a world that's changing so quickly, you are guaranteed to fail, if you do not take any risks"                                                                              Mark Zuckerburg (before facebook IPO)   Introduction   The transitions to a public company is a very important development in the history of companies and the next major step in the evolution of any private company, not to mention its role in the deepening of capital markets. The Initial public offering (IPO) launches an immense growth for any company. However, the procedures involved are rigid and require strict due diligence pre IPO and post IPO. Materialization of new listings in the United Arab Emirates (UAE) is however not that efficacious despite the country's market rallying at or near the fastest pace in the world. According to the latest survey , the Dubai Financial Market General Index is up 126.8 per cent in the past year, with Abu Dhabi Securities Exchange Index rising 69.7 percent. The IPO extends substantive capabilities to the public company in terms of growth and development, or in terms of dedicating the concepts of transparency governance and effective management.   Experts are saying that long awaited changes in commercial laws of UAE are boon to the UAE market. UAE economy aims to compete with global standards and ensures transparency in the system with a view to sustain a global economy in this competitive world. To attract more foreign investment in the country this was a need of an hour. The commercial companies law (Federal Law No 2 of 2015) has diversified the avenues.    The main aim for passing UAE Federal Law No (2) of 2015 is to enrich and diversify the UAE economy in order to compete on a regional and global  level, and to enhance the way in which commercial companies operate in the UAE. The idea is that greater transparency and clarity in the system will naturally result in an increase in investor confidence in the UAE market, the ultimate objective of which is to attract a larger volume of foreign investment into the UAE.   The recent proposed change to the UAE companies law will penetrate the IPO market. Under the new companies law, the percentage of ownership that must be sold in an IPO will be cut to 30 per cent from 55 per cent. This is a hindrance for companies going public in the UAE and companies which are looking for massive expansion of their activities are opting for other exchanges in the world, for instance London stock exchange being the most preferred option for the companies in UAE. Recently the big names have come up with their IPOs like Damac holding, a top developer in the UAE which listed their shares on London Stock Exchange. Even Emaar is considering its first issue in the near future. One Abu Dhabi based company has also planned to sell shares on the London Stock Exchange to feed its expansion.     Another constraint under the local listing is regarding the pricing of shares. There is a lack of flexibility for owners in structuring sales as shares are to be priced at a par value of Dirham 1. As per Emirates Securities and Commodities Authority (ESCA) guidelines 2, 45 percent of the shares need to be subscribed by founders before the remaining 55 percent of the shares are offered to the general public via IPO.   Regulatory framework of IPOs - local listings   In the UAE, there are three stock exchanges. Abu Dhabi Securities Exchange (ADX) lists mostly local UAE companies and NASDAQ Dubai deals in the trading of international stocks. The two stock exchanges namely DFM and ADX fall under the regulation of Securities and Commodities Authority (SCA) which is a governing body and both stock exchangs have to comply with the standards of SCA. SCA is a watchdog authority to protect investors', brokers' and listed companies' rights.      Similarly, Dubai Financial Services Authority (DFSA) is the governing authority of NASDAQ Dubai which follows the international standards of listing on the similar lines as of EU norms. In line with the international regulatory framework, a listing on NASDAQ requires certain formalities, however the rules and regulations purported are to be favorable and intuitive and close to the DFSA objectives. The Markets Law 2012 3  and the Market Rules came into force in 2012 after a public consultation process and based on the rules published by Financial Regulation Authority, United Kingdom. A company formulating an IPO would require establishing a concurrent dialogue with both the DFSA and NASDAQ Dubai. The most essential document which sets out all the details and terms of offerings is the Company's prospectus. A requirement that the company must have a market capitalisation of at least USD 10 million and that it must normally list at least 25% of its shares 4 .   Conclusion   In the view of above, the UAE is expected to be a very strong market for IPOs this year. The policy makers are keeping a liberal view and expecting the positive growth of the market. According to a new report from Ernst & Young, capital raised in the country and the wider MENA region saw their highest levels since 2008. 23 IPOs in the region raised USD 3 billion last year marking a 64% increase in terms of volume when compared to 2012 5 . Three IPOs from the UAE, including Al Noor Hospital, DAMAC Real Estate Development and Action Hotel, secured over USD 740 million from foreign listings on the London Stock Exchange .6  ]]>Wed, 09 Dec 2015 12:00:00 GMT<![CDATA[Share Pledge for Commercial Facilities ]]>

    Diageo, a company more commonly associated with alcoholic beverages Smirnoff, Guinness and Johnnie Walker in the United Kingdom- held almost 27.8 percent stakes in a company called United Spirits Limited, one of the leading spirits company in the Indian market by volume.  A series of share pledges by United Spirits Limited in favor of banks for raising capital later resulted in the stake of Diageo being raised to be more than 57 percent. 

      A fierce and debatable subject which can be an interesting case study on the subject of share pledge is the story behind United Spirits. United Holdings pledged shares of the company United Spirits to raise funds for a distressed business. As it now holds, the bank decided to recall the loans given to Kingfisher Airlines by selling part of the collateral - the shares in United Spirits.    In a more structurally advanced legal system, share pledges have evolved as means of fund raising for businesses. In the United Kingdom for instance, a 'floating charge' can be created over the assets or shares of a company. Such a form of security is created in assets which are not constant. The security interest therefore floats over funds. Commercial companies or limited liability partnerships agree for events that trigger crystallization of 'floating charge'. Once the floating charge has crystallized due to occurrence of event of default, the owner can exercise his rights over the assets.   Countries like the United Arab Emirates are one of the most sophisticated economies in terms of the transactions they witness between the fine print.    Legally speaking, the region has evolved from the stages of infancy to that of toddlerhood. As such, it would be interesting to understand whether the United Arab Emirates in fact recognizes the concept of share pledges as collateral security for fund raising or not.    Within the UAE, there are at least six different types of mortgages or securities depending on the nature of collateral, pledge being one of the kinds. Before discussing the effectiveness of pledges, let us understand what kind of assets qualify as security and could create on what is known as 'charge'.   UAE Civil Code defines immovable property as something which has a permanent fixed nature and may not be removed without damaging or altering its structure. Movable property is therefore anything but immovable property. In terms of movable property, a further sub classification exists, i.e., tangible and intangible. Goods, cash, machines and related are tangible. Intellectual property, capacity to contract, debts, licenses and shares are intangible.1    Let us now take into consideration the concept of share pledge. Shares are part of a commercial business and covered under Article 39 of the Commercial Transactions Law. The general rules relating to a 'movable' property by definition are not necessarily applicable to 'commercial businesses' although it is classified as movable. Pledge by definition means the actual parting away of or delivering of possession from the pledgor (mortgagor) to the pledge (mortgagee). However, pledge within commercial businesses does not follow this rule. In commercial businesses, the mortgagor may continue to enjoy possession of the commercial business.    Article 49 of the Commercial Transaction Law states that pledges in commercial businesses can only be created in favor of banks and not other lenders. In order for a pledge to be valid or effective against third parties, it must be recorded in writing at a registry along with particulars of the pledge to be well specified in such recording documents- the deed of pledge.    Based on the definition of pledge, lenders have been careful in creating share pledges in the UAE especially given the fact the most common form of company- an LLC does not involve issuance of nominal or bearer forms of shares. A nominal share is one where the name of the registered shareholder appears on the share certificate, while bearer form of shares do not have a name appearing on the share certificate. Therefore the transfer of rights or shares for nominal shares is effected by a share transfer deed. In case of the bearer form of shares, such transfer can be effected by physically handing over the share certificate custody to the pledgor.    With the amendment to the Commercial Companies Law, the complexities surrounding the aforesaid have been resolved to great extent. Article 79 of the amended law provides that: 'a partner may transfer or pledge its shares  in the company to another party or third party. Such transfer shall be made in accordance with the terms of the MOA of the company under an official document in accordance with the provisions of this law. Such transfer or pledge shall not be valid against the company or third parties until the date of its entry in the commercial register with the competent authority' In light of above, it is inferred that as long as the pledge can be registered on a commercial register- maintained by the regulating authority of a free zone, the economic department or the stock exchange regulators- the pledge will be considered valid and enforceable.

     

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    Thu, 03 Dec 2015 12:00:00 GMT
    <![CDATA[Role of Intellectual Property in Food & Beverage Industry ]]>

    "I hate the notion of a secret recipe. Recipes are by nature derivative and meant to be shared - that is how they improve, are changed, how new ideas are formed. To stop a recipe in it's tracks, to label it "secret" just seems mean."- Molly Wizenberg, Food blogger 

      One cannot imagine a life without food. The need to eat is as natural as breathing so it must not come as a revelation that food plays a significant role in the legal scheme of things. I am sure you are wondering what we are talking about here. The food and beverage industry surprisingly involves several aspects of intellectual property law. Be it the widely recognized red logo of the coca cola bottle, the secret behind the KFC chicken recipe or the ta da da music of the McDonald's advertisement, the food and beverage industry employs it all-patents, trademarks and copyrights. It is absolutely crucial to protect one's intellectual property in the highly competitive food and beverage industry. It costs a significant sum to launch a product in the market and with the industry becoming more and more focused on using technology for processing, production, packing designs, it is imperative for any company to look after its creation by employing intellectual property law to its advantage. We are creatures of habit and as consumers we turn to products that are recognizable because of their brand so after doing all that, It is necessary to protect one's creation, it would seem worthless if someone was counterfeiting your brand to sell an inferior product.    The scope of intellectual property law in the food and beverage industry is immense and we will discuss this in detail in a series of articles in our newsletters. In this article, we are going to discuss the possibility of being able to copyright recipes. Can one claim creative rights over a recipe they created? Chefs and restaurateurs are artists that use the medium of food to express their creativity. A simple dish like a burger can be tweaked in several different ways to create new dishes. Can adding crushed black pepper to a dish that calls for black peppercorns make it into a new dish or would it be infringing upon the intellectual property rights of the original chef?    To answer such a question, one must first examine what is the purpose of a copyright. Is copyright a way to defend one's creative work to as to forbid someone copying or counterfeiting it. We must note that in the food and beverage industry, being granted copyright to a recipe can be extremely convoluted.    In the United Kingdom, copyright is an automatic  right and does not require registration as long as the product is published in a perceptible form. That being said, this basically implies that a copyright could be granted to cooking and recipe books but not to recipes in those books as this would mean that anyone employing the books to recreate the recipes published would be infringing on the author's copyright. At the same time, someone who may publish or reproduce recipes from another and present them as their own is certainly breaking the law.   On the other side of the Atlantic, the United States Copyright Office asserts that the law does not protect recipes that are listings of ingredients but the scope of the law could extend to a detailed depiction of the recipe which would include but not be limited to the cooking method, a description, explanation, or illustration, such as that found in a cookbook. The year 1996 saw the case of Publications International, Ltd. v. Meredith Corp where the US Court of Appeals vacated an injunction granted by a district court by stating that recipes generally fall under the purview of patent law and not that of copyright. The court held that in essence, recipes are to be considered procedures and processes which are to be secured by a patent and not copyright. In the year 1998, the US circuit court relied on the decision made in the Meredith case when they were presented with the case of Lambing v. Godiva where Lambing, a pastry chef, filed a case against the popular Godiva chocolatier for copying the recipe, design and development of chocolate truffle. The court adjudicated against Lambing stating that it was not possible to copyright recipes and since her instructions of the recipe had not been specific but rather vague, it was considered to be a statement of facts but not directions that were unique enough to be granted a copyright.    It must be kept in mind that creative works are the most difficult kinds of property to protect. A work of art that is not tangible and cannot be held or explained without the help of formulae or drawings can be difficult to copyright. It is opined by several legal and culinary experts that this industry is largely self regulating as the chefs involved are rather proud and would never blatantly copy recipes. The experts also believe that though recipes cannot be protected, there are several aspects of their business that require protection such as their logos and menus or even the general layout of their restaurant.   To conclude, we must notice that recipes and adapting them to one's taste and eccentricity have been the custom since the beginning of time. Cooking is an art though there are several individuals who would disagree with that statement. But when we consider the likes of Wolfgang Puck, Julia Child or Mario Batali, would you consider them anything less than artists? In recent times, attempting to copyright one's recipe is not so much about protecting the economic enrichment of a chef but rather protecting their right to be considered a creator of a certain dish. It is a detriment in the application of the law when we consider that it is impossible to protect a novel culinary idea in a dish. In the next article we will examine the role of patents and the concept of trade secrets in the ever dynamic food and beverage industry.  ]]>
    Tue, 24 Nov 2015 12:00:00 GMT
    <![CDATA[Abu Dhabi Commercial Conciliation and Arbitration Center ]]>

    Evolution has created several ways of defying the unsettling consequences of disputes. In the animal kingdom, where survival is dependent on mutual respect, harmony and assistance, there is a need to maintain beneficial relationships. For example, chimps kiss and embrace after fights. As we have evolved, so have our dispute resolution methods. Arbitration is a significant development in the way trade disputes are settled between two parties. In this article, we will discuss the evolution of the Abu Dhabi Commercial Conciliation and Arbitration Centre (the ADCCAC) and its policies and procedures.

    We must take note that parties that are desirous of employing arbitration as a preferred choice of dispute resolution mechanism must incorporate a model clause into their contracts and agreements. This clause in the agreement must state specifically that in case of any dispute that is a result of the execution, interpretation or termination of the contract, the parties will attempt to resolve the dispute in accordance with the Rules of the ADCCAC.

    The first step for the either party is to file a request for arbitration to the ADCCAC with details such as names, addresses, means of communication for the parties to the dispute along with several copies of documents and relevant supporting materials. The ADCCAC collects a fee of one thousand dirhams at the time of the request for arbitration. This fee is non refundable even if the request is withdrawn or not pursued.The respondent is granted twenty one (21) days from the date of receiving the request with his preliminary defence along with relevant supporting evidence or any objection concerning the validity or applicability of the arbitration agreement. The respondent also has the right to include any remarks or comments he may have regarding the number and choice of arbitrators in case these issues have not been already agreed upon by the parties. The respondent also submits his appointed arbitrator's details, any comments regarding the venue and language of arbitration along with any counterclaims or any opposing demands that are associated with the dispute. It is imperative to note that at this stage, the failure of the respondent to reply to the arbitration request or designate its own arbitrator within the designated 21 days shall not prevent the ADCCAC from commencing the arbitration proceedings and appointing a panel in case the arbitration agreement provides for the parties to designate its own arbitrators and the respondent has failed to do the same. It shall be deemed that the respondent has waived the right prescribed for the respondent to designate its said arbitrator. The director of ADCCAC may grant the respondent an additional fourteen (14) days to submit his response at his discretion.

    If the agreement between the parties specifies the number of arbitrators, the centre will allow for the same number but in case this has not been agreed to, the default is the appointment of a single arbitrator. The individual/s nominated as arbitrator must indicate in writing his/her acceptance or state any facts such as conflict of interest which may prevent their neutrality to the matter at hand. In the course of the arbitration proceedings, if there exist new circumstances that may affect his/her impartiality or independence, the arbitrator must state the same at the earliest available opportunity. We must take note that post the appointment and acceptance of the arbitrator, the arbitrator cannot be challenged unless there seem to be specific circumstances that arise which raise justifiable doubts over the arbitrator's neutrality or independence. A challenge request must be then submitted to the director of the ADCCAC stating the reasons for the challenge along with supporting documents and evidence within a period of fourteen (14) days from the date of the challenge party being advised of the arbitrator's appointment. If the concerned arbitrator does not step down he shall submit his observation to the director within a period of ten (10) days from the date on which he receives the challenge notice.

    An arbitrator shall be replaced by another in the course of arbitration proceeding in the event of death, renunciation or upon the party's agreement to dismiss him or upon the committee's acceptance of his challenge in accordance with the previous article, or upon terminating his task pursuant to the following paragraph.

    According the revised rules which were issued in the year 2013 by the ADCCAC, the language of arbitration should be Arabic unless the parties have agreed otherwise. If the disputing parties have previously agreed to the application of law of a particular country, the substantive rules of that country shall be applied provided they do not conflict with the laws of the country. In all cases, the arbitrator decides the disputes in line with the terms of the contract and takes into consideration the related applicable commercial laws and customs.

    If the parties have not previously agreed upon a place where the arbitration shall be conducted the place of arbitration shall be Emirate of Abu Dhabi unless another venue has been specified by the committee taking into consideration all arbitration related issue and circumstances including the observation of the parties. In all cases the arbitral award shall be deemed issued at the venue of arbitration.

    The centre shall in return for services rendered by it collect a proportional fee of 15% calculated on the fees of the arbitration panel's specified in article 43 or article 44 as applicable.

    In the course of the arbitration proceedings, if the parties reach a settlement, the terms of the settlement should be submitted to the panel. In such cases, the panel issues an award on the mutually agreed terms of the amicable terms of the settlement thus bring the arbitration proceedings to a close. The consensual award has the same binding force as that of awards that are adjudicated in the process of arbitration.

    We must understand that alternative dispute resolution mechanisms such as arbitration have gained momentum in all jurisdictions not only because they are deemed cost effective but also because these methods seem to provide better opportunities for the parties to come to a mutually beneficial settlement. ADCCAC since its inception has revised its rules which saw a particular increase in the number of cases being registered at the centre especially those related to real estate and construction disputes. As the methods of dispute resolution have evolved so has the ADCCAC. In our experience with the centre, it allows a streamlined and effective approach which will continually contribute to its success. 

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    Wed, 11 Nov 2015 12:00:00 GMT
    <![CDATA[Закон о строительстве: требование продления в арбитражном суде]]>Construction Insight:     The sight of a rainbow in the middle of a desert is a rather recherché glimpse. United Arab Emirates however, is not a conventional desert panorama come true.   Take for example the construction industry in the region. There is an interesting mix of cultures and backgrounds within the construction sector, for which UAE is often referred to as the boiling pot of nationalities. The variety of joint ventures and presence of conglomerates with diverse international backgrounds stands as a testament to above. Majority of players in this industry are world renowned and it therefore infers that the prevalence of the FIDIC 'Rainbow Suite' is not something new to this region.    Much ink has been spilled on the use of FIDIC contracts in UAE. Legal experts have dismayed the fact that UAE industry's reliance on FIDIC 1987 version of the Red Book has as a matter of fact has become a loyalty factor. The use of latest edition of the Red Book is less commonly seen. What has also been debated is the paradoxical use of an internationally standardized template in a civil law jurisdiction.  All that said, as experts in the field STA attorneys continue to witness the execution of multi million contracts in the region which are commonly inspired from the FIDIC Red and Yellow Books, and the disputes culminating from them. In this article, we will examine the extension of time (EOT) clause, compensation for it and its acceptability before UAE arbitral bodies.   FIDIC is the French acronym for International Federation of Consulting Engineer.  It is the mostly commonly used form of contract in the construction industry. Established in 1913 and since then amending and adding to the templates of construction contracts, FIDIC now constitutes a 'rainbow suite', of which includes the following (i) the Red Book (ii) the Yellow Book (iii) the Orange Book (iv) the Green book (v) the Silver Book (vi) the Blue Book (vii) White Book (viii) Gold Book. The most commonly used FIDIC templates in UAE are the Red and Yellow Books. Pursuant to Law Number 21 of 2006, the Emirate of Abu Dhabi mandated the use of 'build only contract' and 'design contract' templates in construction field for the projects initiated by the government entities.   Dispute Resolution Under FIDIC   With the customary usage of 1987 and 1999 versions of FIDIC contracts, one question that arises is the interpretation of these contracts when a dispute arises in relation to a claim for the extension of time. In line with the dispute resolution clause of fifth edition of the Red book, when a dispute arises the parties must notify the other of such dispute and refer the same to the Dispute Adjudication Board (DAB). DAB must make a decision with the specified time limit of 84 days. In the event any of the parties is not satisfied with the decision, it must send a notice of dissatisfaction within 28 days following which the dispute can be referred to International Arbitration after 56 days have elapsed and no resolution is achieved. In practice, within UAE, the Common Law qualified attorneys have advocated strict adherence to these timelines while the courts have been lenient about the time limits. The courts place reliance on facts of each dispute and the intention of the parties.    Before a matter can be referred to a court, it must be subject to the jurisdiction of ADCCAC or the DIAC if the dispute resolution mechanism is vested with the arbitration- as is the case with most standard forms of construction contracts. The governing law clause is subject to the prevailing regulations of the United Arab Emirates. Therefore, the interpretation of the contractual relationship is largely inspired by the UAE Civil Code. While the parties are free to choose an arbitrator of their choice, any decision which is in contravention of the UAE Civil Code can be challenged and no longer remains binding.    The condition precedent for a compensation claim   Construction projects are subject to risk of prolongation on account of different reasons- a force majeure event, late mobilization of plant, amendment to scope of work, so on and so forth. Clause 20.1. of the Yellow Book sets out a 'condition precedent' for a claim of EOT. The clause states that:   "If the Contractor considers himself to be entitled to any extension of the Time for completion and/or additional payment, the contractor shall give notice to the Engineer, describing the event or circumstances giving rise to the claim. The Notice shall be given as soon as practicable, and not later than 28 days after the Contractor became aware, or should have become aware, or should have become aware, of the event or circumstance.   f the Contractor fails to give notice of a claim within such period the Time of Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim. "   The above clause read in conjunction with another clause 8.4 sets out a clear mandate that the contractor must set out his concern when an event of delay has been triggered.      The cause and effect link   When assessing the compensation for extension of time or project prolongation costs, the burden of proof lies on the claimant to prove that a 'delay event' occurred and that it suffered a loss due to the same. However, FIDIC templates do not provide for calculation of compensation in the event an extension of time is invoked. This leads to several interpretations of the FIDIC templates. Internationally, the Delay and Disruption Protocol published by the Society of Construction Law (SCL) has been accepted in assessing the EOT claim. Several guideline notes form part of the protocol. The protocol covers important concepts relating to 'global claims', 'float', 'concurrent delays', role of the contractors administrator and disruption.    The SCL protocol identifies the need for recording a project's report through a specialist. It lays emphasis on the actual expenses and actual overhead during a disruption or prolongation period.   When a party brings a claim for EOT and aims to claim compensation towards the same, it must realize the significance of identifying the 'delay event'. Most contractors rely on the fact that the project was delayed and bring in claims for compensation. Primarily, delay claims fail due to the lack of supportive documents to establish that the delay was not concurrent. In other cases, parties are able to access the losses incurred by them including overhead expenses but fail to establish that such loss was due to a delay event on party of the other party. This vacuum between the loss incurred and reason by virtue of which the loss accumulated is seldom identified by parties in the dispute.   Key Point    Generally speaking, the reason behind a rather naïve understanding of above concerns is that most contracting parties assume a contract template to be enough for protecting their interests. Contrary to the aforesaid, it is the continued legal support for a project and inclusion of local laws that forms a deciding factor in assessment of prolongation compensation.   Claims subject to the jurisdiction of ADCCAC and DIAC are governed by the UAE legislation. In this regard UAE Civil Code has a dedicated chapter 'Muqawala' which addresses the relationship between the parties.  The arbitral bodies in such cases are required to rely heavily on UAE Civil Code provisions rather than internally set guidelines.    STA has a specialized Construction and Real Estate practice that works closely with the Arbitration practice. The above article is a general overview - if you have any specific queries you may contact us on the details overleaf.  

     

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    Mon, 27 Jul 2015 12:00:00 GMT
    <![CDATA[Can You Choose Your Judge? ]]>  

    For a variety of reasons, it is highly likely that most people's instincts would incite them to answer "no"! However if we peruse UAE legal texts we will find that actually, in most cases, the answer will be "yes"! 

      Litigation is one of the basic rights guaranteed by most world constitutions, as well as the Universal Declaration of Human Rights. In fact, a state of institutions and laws cannot be achieved unless it gives the right of litigation to all citizens and residents living upon its land. Laws merely organize how to litigate and outline the procedures which should be followed, and courts are formed and judges are appointed based on these laws.   When a person resorts to litigation, he or she submits a statement of claim that is reviewed by a judge or a bench of judges. To this extent, the litigant in question will usually have no input in choosing the judge or judges. However, in the event that a person desires to choose a certain court or judge to adjudicate his case for any reason, is he allowed to do so or not?    Based on a study of the judicial system, it is clear that a person may choose his judge and/or the court in which his case is heard. In some cases if the law does not grant the right to choose any judge or tribunal, but the right to choose the same from a given list. An example of such would be a case in which multiple courts had jurisdiction over a certain dispute, and the claimant may therefore choose the court that it desires. The law also allows people to agree that a certain court shall have the jurisdiction to consider any disputes that may arise. However a case may be filed in an alternate court rather than the one considering the case, and then be transferred. It is worth noting that there is a clear provision in place allowing for the nomination of  an arbitrator in cases whereby arbitration is the agreed dispute resolution forum. Consideration should also be given to cases whereby a party finds out that the judge considering his case has made a fatal error or cheat in his work – here, he shall have the right of adversarial against the judge in question pursuant to the procedures set by law. This is eventually a choice of judge.    Based on the foregoing, then, it appears that the following are all areas of consideration when answering the question posed by this article:   1. Agreement on the jurisdiction of a certain court 2. Choosing from among many specialized courts 3. Transfer among courts  4. Choice of the arbitrator  5. Disqualifying judges and arbitrators   1. Agreement on the jurisdiction of a certain court    When agreeing a contract, the parties to the same may nominate the jurisdiction for the governing of any dispute that may arise concerning the contract's interpretation or execution. This agreement will confirm assent to the court competent for considering the dispute. For example, if both parties to a commercial contract are headquartered in Dubai and the contract is signed in Dubai, it is likely that the agreement will state that the Dubai Courts shall have the jurisdiction to settle any disputes. In this situation there are no obvious problems. However, an agreement may also defer jurisdiction to a court other than the one holding clear geographical jurisdiction. For example, the parties may agree to submit to the jurisdiction of the courts where the claimant's headquarters is located. This is so as to ensure that the rules of local jurisdiction are set in favor of the opponents and have no relevance to the public system. Therefore, parties may agree on contradicting such rules. However according to Dubai Court of Cassation the jurisdiction in Dubai is a judicial entity that is independent from any federal judiciary, and that Dubai courts shall have jurisdiction over all disputes except for the disputes specified by article (102) of the constitution. Such courts shall be limited to their competences without negative or positive contradiction, meaning that they shall not waive their competences and shall not take on competences of other national courts. Jurisdiction in this way is a public system and parties may not agree on contradicting it - but based on the foregoing this is not relevant to local jurisdictions that are considered between courts of the same judicial department.     It is important to note that no agreement between parties may breach procedural jurisdictional laws at state level. An example here would be the way in which parties to a leasehold contract cannot contractually vest the jurisdiction of any disputes in the courts, when state law requires that all rental disputes must be referred to and considered by the rents committee or rental dispute resolution center. Likewise, parties may not agree on the jurisdiction of the plenary court (consisting of three judges) to consider a case within the jurisdiction of the partial court that is composed of a single judge, and may not agree that the Dubai Court shall have consideration of any dispute concerned by the Abu Dhabi Court.   2. Choosing from among many specialized courts    Law may provide for the jurisdiction of several courts at the same time, thus meaning that a claimant may choose from amongst the same. For example, the Personal Status Law provides that jurisdiction in expenses claims matters is vested in the court of the Emirate in which the plaintiff or defendant is resident, whereas the Civil Procedure Law states that the competent court shall be the court in any Emirate where any of the defendants, if they are many, is resident. The fact that a party has to choose a court from amongst a selection has the effect that the party is, to some extent, going some way towards choosing the judge who will adjudicate in his lawsuit. However in the case of multiple defendants, it is required that such diversity is real. A diversity is not real if the intention is simply to submit to the jurisdiction of the court before which the lawsuit is raised, whether or not its existence is known by the trial court with authority to collect and understand the reality of the case as it pleases, without forcing him to resort to a particular court.   3. Transfer among courts   If the legislator is bringing a series of associated cases, it may be the case that he is desirous of having such matters considered by a single judge or a single court in order to avoid conflict of judgments. The UAE law therefore provides for the referral of cases to the court before which the last conflict is raised. The referred court is committed to the consideration of the matters. Legislation also provides that in the event that a case is filed before a court other than that which has been specified in a lawful agreement between the parties, then the court may order transferring the case to the forum agreed upon. The referred court is, again, committed to its consideration, unless deemed incompetent to consider the matter locally or qualitatively. This additionally infers the possibility of choosing a judge, but with the qualification that the agreed tribunal must be competent to consider the case. It is also of relevance that matters may not be referred from the courts to arbitration as a result of conflict, because the rule is that referral is only allowed between courts within the same judicial department. The best example is that referral from the Dubai courts to the federal courts is not permitted, as the judiciary in Dubai is a judicial entity independent from the federal judiciary. Such referral is limited to cases in which the court holds that it is not qualified due to the type of lawsuit or local jurisdiction.   4. Choice of arbitrator    Arbitration is a good example for the selection of judge that separates the rivalry between parties to a dispute, especially as arbitration is regarded as the first form of judiciary in many early communities. However, with the increase in the number of lawsuits filed worldwide and slow litigation procedures, the need for urgent arbitration arises. Arbitration allows a party not only to select their judge, but also to elect the legal rules applied by the arbitrator in the specific case (within the limits this does not violated public order).  The arbitration clause contained in the contract or in a subsequent agreement between the parties, which may include agreement on the number of arbitrators. This number may either be one, three or five, but the number must be odd otherwise the arbitration agreement is null and void. This is so that an individual arbitrator may be chosen by one party and approved by the other, or so that each party may choose one or two arbitrators, and then the arbitrators selected may appoint the remaining member of the panel. If no agreement is reached with regards to the choice of arbitrator, the choice shall be vested in an independent entity such as the arbitration center, a body such as the lawyers bar, or even the courts.   5. Disqualifying judges and arbitrators   The law may provide for circumstances in which the litigant may choose a judge as explained above - however, these cases are not considered as the general rule. More often than not, a judge will be appointed by the courts and the parties to a case will have no input in the decision. Yet in such cases, it may be that a litigant considers a judge invalid to consider his claim either for personal or technical reasons. When this occurs, should the litigant stay silent, or does the law provide a way in which the parties may challenge the same in order to ensure satisfaction and total conviction in the justice of the resulting judgment?    The cases in which the judge may be disqualified are outlined in the UAE Civil Procedure Law, and include (but are not limited) to feuds between the judge (and/or his wife and/or relatives) and the litigants, prior friendships (specified as "habitual dining" or having lived together) between the judge and any of the litigants, the judge's receiving of a gift given by one of the litigants, the appointment of the judge as an arbitrator in a previous matter between the parties, and any other friendship/enmity between the judge and one of the litigants which may result in impartiality.   A judge will also be invalid to consider in the following cases:   -  If he is a spouse of one of the litigants; -  If he or his wife has an existing dispute with a litigant or his wife; -  If he is an agent for one of the litigants in his private works,  or a trustee or custodian, or a      presumptive heir of a litigant or the spouse of the guardian of a litigant or the custodian,      or is related by blood or affinity to the fourth degree with the such guardian, or one of the      members of the board and a manager in the competent company where such a member or      director has a personal interest in the case; -   If he or his wife or one of his relatives or in-laws of descent or for those whom he is an agent,      trustee or guardian, has an interest in the existing case; -   If there is between him and one of the judges' circuit a kinship or affinity to the fourth      degree, and in this case the latest judge is to step down; -   If there is between him and the representative of the public prosecutor or defender of an      opponent a kinship by blood or affinity to the second degree; -   If he had decreed or pleaded for a litigant in the case, or wrote about it even before he joined      the judiciary, or had earlier considered as a judge or arbitrator or expert and had been a      witness in it; and/or -   If he has previously filed a lawsuit against the respondent or submitted a report against him      to a competent authority.    The law states that the work of the judge and his judgments are invalid where the judge meets one of the above criteria, even if it was made under the agreement of the litigants. Finally, the judge may, even if valid for consideration of the case, let the President of the Court consider the approval on the decision of stepping down.         ]]>
    Wed, 08 Jul 2015 12:00:00 GMT
    <![CDATA[Registration and Importation of Pharmaceuticals in UAE]]> Headache? Perhaps you'd take a paracetamol. Upset stomach? Maybe an indigestion pill. Cold or flu? You might consider anti-congestant medication. In the United Arab Emirates, such pharmaceuticals are easy to come by, with the majority of people likely to have a supply already to hand in their purses or bathroom cabinets. Yet although these common medications are not controlled in the same manner as prescription drugs, various approvals are required with regards to the importation, sale and marketing of such produce in order to ensure that the drugs we buy over the counter are compliant with UAE standards, thus ensuring our safe consumption.

    So is the registration of over the counter drugs as simple as the process of procuring and consuming them? Pursuant to Federal Law Number 4 of 1983 (the Pharmacy Law), all drugs must be registered with the Ministry of Health in order to be lawfully sold within the UAE. Article 65 goes so far as to specify that this includes imported pharmaceuticals, whether or not they have been approved and registered in their country of origin. The decision as to whether to register such products shall be at the discretion of the Ministry of Health following application – and as the criteria on which such a decision will be made is unavailable to the public it appears as though any entity applying for the registration of a product shall have very little guidance to follow in order to increase the likelihood of success. The fact that only Articles 63-67 of the Pharmacy Law deal with the actual registration of pharmaceuticals further supports the view that manufacturers are largely unguided in their pursuit of registration, with supplementary regulations (such as the Dubai Health Authority's Community Pharmacy Licensure and Pharmaceutical Practices Guide of February 2013) (the Pharmacy Guide) focusing primarily on the licensing and protocol of institutions and professionals as opposed to the industry's products.


    A reading of the applicable section of the Pharmacy Law would give the understanding that Ministry of Health registration is a strict condition to which all pharmaceutical products sold within the UAE must adhere without exception. Yet owing to the degree of discretion afforded to the Ministry of Health, certain hospitals operated in conjunction with the Health Authorities of Dubai and Abu Dhabi are able to apply for permission to import unregistered drugs in prescribed circumstances. These include emergency medicines used for the immediate preservation of life, drugs which are currently unavailable in hospitals (such as specific medicines used in the treatment of cancer) and those which have not yet been awarded Ministry approval, and specialist narcotic and psychotropic substances. However any approval granted with regards to an unregistered drug will be qualified with the condition that the product is not distributed outside of the institution in question, and will be quantified proportionally to the hospital capacity. The authority of the Ministry in this regards is such that permission may be withdrawn immediately in the event of a breach of any of the case-specific regulations and conditions by the licensed institute.


    We have considered that there is little guidance available with regards to the content and scientific criteria a product must meet in order to effect successful registration. This, it would seem, gives rise to another question: what is a "medicine" within the meaning of the applicable law? How is a potential importer supposed to know whether or not his product will require registering pursuant to Article 65? The Pharmacy Law defines medicine as being "any medicine that contains one or more element for treatment or protection of human beings and animals", with the Pharmacy Guide going further to specify "Medicine/medication/pharmaceutical drug shall mean or can be loosely defined as any chemical substance intended for use in the medical diagnosis, cure, treatment, or prevention of disease". But as any person who has spent considerable time browsing the drug store shelves for a specific product will attest, today's market consists of a huge variety of healthcare products – not just the common medicines discussed earlier and prescription drugs, but various supplements, nutritional enhancements, and cosmetics which may not come under the definition of "medicine" per se. Do such items fall within the remit of the Pharmacy Law and its requirements?

    To this effect the Ministry of Health produced Circular Number 20 of 2001 (the Circular), as issued by the Director of the Drug Control Department. Herein it is specified that the General Sale List (the list consisting of all registered pharmaceutical substances in the UAE) includes "Dietary supplements, medicated cosmetics, antiseptic and disinfectants and miscellaneous products which contains pharmaceutical ingredients and / or a medical claim and cannot be classified as medicines". And despite the fact that it still does not suggest any composition criteria, the Circular goes some way towards laying out the various administrative requirements that a product should meet in order to obtain a successfully registered status. Most importantly, it is specified that the application form (available from the Technical Affairs Section or downloaded from the Ministry of Health website, in either the Arabic or English language) must be accompanied by the relevant Certificate of Pharmaceutical Product (CPP) as per the World Heath Organization Certification Scheme, or a Free Sale Certificate (FSC). This must have been issued by competent lawful authorities in the product's country of origin, it must additionally have been authenticated by the Foreign Affairs section of the UAE or any GCC embassy in the country of origin. Moreover a successful application must be accompanied by 3 (three) samples of the pharmaceutical in its final packaging, along with a certificate of analysis for the given batch of samples

    Further to this the application for registration will require the submission of various supporting documentation on the letterhead of the company requesting the registration of the product (complete with the company logo, stamp and authorized signature), which includes but is not limited to:

    –A statement from the company declaring that the product is free from any hormones, heavy metals, antibiotics, steroids, derivatives of pork and any natural and  chemical ingredients with the potential to cause harmful effects to humans. When submitting a product containing an ingredient derived from animal source the    company must go so far as to specify the kind of animal and specifications of the part extracted from it, and must additionally clearly note the percentage of alcohol (if       any), together with an explanation as to why such ingredients were incorporated;

    • Halal certificate issued by recognizable organizations and authorities;
    • Details of a medical storage facility licensed by the Ministry of Health (as per the Circular Number 1 of 2006);
    • Samples of the outer label, inner label and insert of the product;
    • and CD containing artwork (outer, inner label and insert) of the product.
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    Thu, 21 May 2015 12:00:00 GMT
    <![CDATA[Закон о Запрете Фронтирования в ОАЭ]]>Совет) опубликовал Федеральный Закон №17 в 2004 году (Закон № 17), касающийся Закона о Запрете Фронтирования, который запрещает использование побочных контрактов или номинальных соглашений с гражданами ОАЭ. Закон №17 гласит, что «фронтирование» находится под запретом и оно определяется как «предоставление права иностранному лицу – физическому или юридическому – предпринимать любую экономическую или профессиональную деятельность, которую он не имеет права осуществлять по законам ОАЭ». Впоследствии Совет выпустил резолюцию кабинета в 2007 году, и эффективное принятие закона не вступило в силу до 2009 года. В отсутствие дальнейших пояснений от Совета, остается неясным являются ли положения Закона №17 эффективными на сегодняшний день.   Несоблюдение положений Закона ОАЭ о Запрете Фронтирования влечет за собой штраф и уголовную ответственность за повторное нарушение. Важно отметить, что санкции, указанные в Законе №17, относятся ко всем сторонам побочных контрактов и номинальных соглашений. В прошлом они именовались по-другому – соглашение, соглашение о займе, соглашение о займе и управлении, соглашение номинальных акционеров, или договор о намерениях, но по сути все эти договоры служат одной цели и идут вразрез с Законом № 17.   Грамотная, профессиональная консультация и совет юриста в данном случае имеют большое значение, чтобы убедиться, что договор не является нарушением Закона №17. ]]>Sat, 25 Apr 2015 12:00:00 GMT<![CDATA[Legal Functions and Framework in ADGM]]>

    LEGAL FUNCTION AND FRAMEWORK IN ADGM

    What a year to be investing in the United Arab Emirates! According to statistics published by the International Monetary Fund (IMF) the nation's GDP hit USD 419,000,000,000 (US Dollars four hundred and nineteen billion) in December 2014 – a 4.8 percent increase on the preceding year. The IMF has predicted a four to five percent growth rate over the next seven years, thus indicating that our economy is forecast to go from strength to strength. And this is something of an achievement, given the continuing recession and economical collapses occurring elsewhere in the world at present, particularly in Europe. The advantages of investing in the UAE are, it seems, increasing, with previously-perceived deterrents, such as the lack of an exhaustive and comprehensive insolvency law, soon to be eradicated by the implementation of new laws and procedures.

    Yet the UAE is rife with investment opportunities – with an infinite number of ventures available across a huge expanse of market sectors spread throughout seven Emirates, identifying the most appropriate area in which to invest is by no means a small task. Obviously the final decision will complement the nature of the activity at hand, but a commercially-astute and competitive investor in the financial market will no doubt want to establish himself in a world-renowned financial centre. Until now his choices within the UAE and indeed throughout the Middle East would have been somewhat limited, with the Dubai International Financial Centre (DIFC) dominating the market. But the emphasis here in on the "until now"…

    Established pursuant to Federal Law Number 4 of 2013, Federal Decree Number 8 of 2004, Abu Dhabi Federal Decree Number 15 of 2013 and Cabinet Resolution Number 4 of 2013, the Abu Dhabi Global Market (ADGM) is almost ready to open its doors to investors. As a financial free zone governed by three independent regulatory bodies (namely The Financial Services Regulator, The Registration Bureau and The Courts) the ADGM has the ambition of becoming one of the world's leading financial centres. Despite it's close proximity to the DIFC the ADGM looks set to thrive on account of Abu Dhabi's strong and constant financial position, as supported by natural resources. Such factors promise to encourage financiers to seriously consider their options when selecting a Middle Eastern financial centre henceforth.

    When considering a forum, however, an additional consideration will inevitably be the various rights and restrictions afforded therein. Promising potentials and returns are a strong attraction, but the rules and regulations observed by a centre may also play a part in an investor's decision-making. In due consideration of such a factor, the ADGM states on its website that "In collaboration with other International Financial Centres, global institutions and regulators, Abu Dhabi Global Market will develop and support member institutions with the regulatory framework, legal jurisdiction and attractive business environment they need for sustainable business growth."

    So what is the regulatory framework and legal jurisdiction of the ADGM? Until very recently the legislative system has been uncertain, but the latest announcements have confirmed that the underlying law of the ADGM will be that of the common law jurisdiction of England and Wales. For clarity, it seems prudent to note here that "common law" is a legal system in which the prevailing rules and regulations have been established as a result of court/tribunal decisions in previous cases. However in the majority of jurisdictions operating such a system (for example Singapore, Australia and England/Wales) the common law glues together a framework of statutes and statutory instruments. In other words, the prevailing law consists of a mixture of statute and common law, with the provisions of common law often created in order to fill gaps in the legislative framework where specific cases raise awareness of the fact that the law is lacking. For the most part, case law does not actually give rise to new legislation – more guides the courts to interpret certain laws in a specific way, owing to the way in which they were applied in the precedent case.

    Having two methods in place via which laws are created in the same jurisdiction can inevitably lead to complications, such as case law conflicting with statute. Yet it is a clear feature of the English legal system in particular that where such provisions conflict, the statutory law will prevail. This is a principle which the ADGM will also adopt, which in turn shall help to solve another obvious problem in application of English/Welsh common law therein – namely, what if certain principles of common law developed by the jurisdiction of England/Wales in keeping with its own needs are contradictory to purpose in the ADGM? For example, what if a particular provision of employment law in force in English/Welsh common law opposes the approach that the ADGM wishes to take with regards to employment? Despite adopting the English/Welsh common law as the basis of its legislative framework, the ADGM shall additionally deploy its own set of rules and regulations in certain areas (which may be either drafted afresh, imported from other foreign legal systems, or both). And, just as statute prevails over case law in England/Wales, so the ADGM regulations will prevail over the common law provisions adopted therein. Of course, just as new laws are introduced from time to time in every jurisdiction across the globe, both the common law of England/Wales AND the ADGM will develop new principles in keeping with requirements. New common law provisions of England/Wales shall have immediate effect in ADGM, yet these may be superseded by new ADGM regulations overruling the same.

    It therefore appears as though English/Welsh law is applicable in ADGM, but is not binding. If ADGM authorities (namely, the Board) consider a particular piece of common law to be contrary to requirements, they may simply draft a regulation deeming it as inapplicable. However under Section 2(2) of the draft regulations currently proposed by ADGM, decisions made by the UK Supreme Court will have a binding effect on the ADGM courts. Given the fact that the ADGM courts shall neither have official links to any UK courts, nor have any right to appeal to them or to challenge their decisions, questions have been raised as to whether compelling the ADGM courts to abide by rulings of the Supreme Court is in the ADGM's best interests. Yet given that any civil case escalated to the Supreme Court will have been considered by the UK County Court, High Court and Court of Appeal before reaching such a stage, it seems reasonable to assert that, at some point, a final presiding authority should close the matter. Allowing it's courts to divert from the decisions of the highest judicial authority within its legislative template would leave the ADGM's legal system without boundaries, and may discourage participation by investors wary of the fact that the ADGM courts could, in theory, act contrarily to reasoned decisions or fail to establish a clear and precise legal position in relation to any particular matter. It goes without saying that a lack of confidence in a financial centre's rules and laws will act as a huge deterrent, and nominating a final and presiding external authority guaranteeing regulation of the court system will go some way towards alleviating such a risk.

    Given that the legal architects developing the framework of ADGM law started with a blank canvas and were free to adopt any provisions that they considered to be appropriate, the decision to apply English/Welsh common law as a live instrument (as opposed to taking the principles thereof and writing them into ADGM law as specific regulations) has been called into question. Why not just "codify" the current common law, thus making the current provisions constantly applicable and more easily accessible? Given its capacity to fluctuate and divert from statute, common law is often considered as hard to follow – yet despite this, the ADGM Board have decided not to adopt the "hybrid" approach. Although perhaps contrary to the wider UAE's efforts to implement simple and accessible laws, the ADGM's proposed approach pays consideration to the fact that the law is a living organism, and will grow and adapt in order to fulfill the needs of its jurisdiction. And just as a common law provision may rapidly be established when a case demonstrates a particular need for the said provision, a second case may just a quickly call for the implementation of an opposing law (such as the Hookway law, which was implemented in England and Wales in 2011 as case law, but superseded by further law introduced within weeks). Codifying case law would cement the law of a jurisdiction into one particular era, which may quickly render its provisions dated and inapplicable in new situations.  

    We have considered the way in which the ADGM will draft its own unique rules and regulations to operate in conjunction with English/Welsh case law, and have just referenced the codification of common law. But what of the implementation of English/Welsh law (whether common law or statute), amended to suit the requirements of the ADGM? The authorities thereof have recently released a list of UK statutes which shall have effect in the ADGM jurisdiction, many of which are qualified with commentary citing the adaptation or removal of various clauses. Whereas such an approach may defy the point of adopting English/Welsh law (why take the law of a different jurisdiction and amend it to fit? If it doesn't fit, why not disregard it all together and draft appropriate legislation from scratch?) it pays respect to an underlying principle of common law – namely, that there will always be exceptions, and no one law could possibly extend so far as to cover each and every applicable circumstance. Taking the existing law and adapting the same in keeping with current requirements is, by definition, within the spirit of common law. Prohibiting the adaptation of statute would be contrary to the purpose of adopting a common law system, which by its very nature allows for change as needs arise.

    The list of applicable UK statues is lengthy, and the scope of considering each in turn enormous. Yet a scan of the titles of the various provisions alone will inevitably alert the reader to the fact that some of the laws included were implemented a very long time ago, with the most historic being the Statutes of Fraud Act of 1677. (Here's a random point of interest – the Statutes of Fraud Act actually has very little to do with fraud, but instead provides certain guidance with regards to the form that various contracts, such as wills and land-related deeds, should take. Fraud is dealt with under the Fraud Act 2006, which applicable in both the civil and the criminal courts). Although the current English/Welsh legal framework is vested in and built upon such historic provisions, the actual law in practice has been adapted and developed in accordance with the specific nation's needs. It consequently has regards to the history, culture and legal ethos of England and Wales specifically. Simply identifying the said law and transplanting it so as to apply in a foreign jurisdiction may therefore be a move that is subject to criticism. Although the law suits the needs of England/Wales, what evidence is there to suggest that it will suit the needs of the ADGM, which, despite being a free zone, will inevitably be influenced by the culture, religion and social customs of the United Arab Emirates? The legal system of the UAE is founded upon the principles of Sharia Law, and it is therefore likely that incompatibilities will arise between UAE practice and English/Welsh law. This is particularly the case when considering the fact that some of the statutes which the ADGM intends to adopt make specific reference to women (for example, the Law Reform (Married Women and Tortfeasors) Act 1935 and the Law Reform (Husband and Wife) Act 1962). It will be important for the ADGM to preserve the overriding cultural principles of the UAE, despite being legally independent, so as not to deter regional investors.

    It seems appropriate here to pay additional consideration to the fact that case law is not always easily accessible. Even when the adaptation of a particular statute meets no opposition, the fact that the provisions of the same may have been amended by case law in practice is not always obvious. This is the case with several of the statutes on the list proposed by ADGM. For instance, the list shows that various sections of the Law of Property Act 1925, including section 53 thereof, will apply in the ADGM. However this specific provision (namely section 53(1)(c)) is subject to strict qualification owing to the case law of Saunders v Vautier and later Vandervell v Inland Revenue Commissioners. The decisions of the House of Lords in these matters have binding authority in the courts of England and Wales, and therefore will preside in the AGDM courts as well. However it is not clear to the layman that such provisions are in effect, and the inaccessibility of the law may discourage investors, particularly those accustomed to operating in civil law jurisdictions.

    The ADGM is currently welcoming commentary on its proposed legislative system, thus implying that amendments to the projected framework are still possible. It may therefore be the case that the present list of applicable statutes is amended. The addition of extra statutes seems particularly likely given the fact that more recent laws of corporate significance are notably absent, such as the Bribery Act 2010. Given its wide-reaching juridical scope and provisions tailored towards combatting offences which are particularly prevalent in the international finance market, the omission of the Bribery Act is a little confusing, and it's inclusion in the list of statutes at a later stage would be far from surprising (albeit amended so as to provide for penalties enforceable in the ADGM jurisdiction). Although specific regulations pertaining to matters such as employment and real estate have been disclosed, the criminal law of the ADGM remains unclear, yet it is widely anticipated that UAE Federal Law Number 3 of 1987 (the Penal Code) will apply. This follows the position in DIFC and all other free zones throughout the UAE, on account of the fact that the respective Boards do not have the power to criminalize and de-criminalize acts.

    Despite being far from mutually exclusive of one another, the legal system and the court system are two separate areas of discussion. We have thus far concentrated on the way in which the ADGM law will be structured – but what of how it will be implemented? In other words, how will its courts be organized? How will they operate? The DIFC notably operates a two-tier system, with a Court of First Instance and a Court of Appeal, thus allowing parties to a matter to challenge the decision of the Court of First Instance in the permitted circumstances. Although the ADGM have revealed that there will be no right to appeal to any UK court, it is not yet clear as to whether an internal court hierarchy will provide any scope for challenging an initial ADGM court judgement. Moreover there is at present no information available with regards to enforceability of awards secured outside of the jurisdiction. For example, at present arbitration awards made in the Dubai International Arbitration Centre (DIAC) may be enforced via the DIFC courts as per section 42(1) of DIFC Law Number 1 of 2008. This extends so far as to cover the enforcement of awards made by arbitration tribunals outside of the UAE, particularly where the UAE has entered into a treaty regarding the mutual enforcement of judgements such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) . However it was suggested in the case of Meydan Group LLC v Banyan Tree Corporate PTE LTD that the execution of a judgement pertaining to assets held outside of the DIFC will be exceptionally difficult to conduct, as the cooperation of external authorities such as the police may be required. As yet there has been no announcement regarding the ADGM's powers to enforce awards made in the courts of Abu Dhabi or further afield and, more pressingly, no indication has been given as to any cooperation between the ADGM and other local authorities. Relationships with the Abu Dhabi police force and other significant authorities may therefore be an area on which the ADGM should concentrate prior to commencing operations, as this would permit a wider executional capacity.

    Just as the DIFC's common law basis incites many entities to nominate DIFC as its dispute resolution forum of choice, so it is expected that the ADGM will be a popular forum for those familiar with such a system. However as with any free zone, ADGM will take time to develop and grow, and although companies may begin to incorporate therein as soon as the doors are open for business, it will inevitably take some time for commerce to mature and disputes to arise accordingly. It is therefore likely that the ADGM courts will remain relatively quiet initially – unless, of course, the jurisdiction is opened up to entities operating outside of the ADGM. This is a realistic possibility given the fact that, pursuant to Law Number 16 of 2011, the DIFC jurisdiction became accessible to ANY party wishing to refer a dispute as of 31 October 2011, providing that both parties to the dispute had mutually agreed to submit to the jurisdictional authority of the DIFC in writing. When considering the benefits that this has afforded DIFC (in terms of both financial income and the weight carried by judgements issued therein) the ADGM may wish to implement such a strategy with immediate effect. This may be further encouraged by the way in which the DIFC courts are often favoured above the Dubai Courts due to the approach they take with regards to awarding legal expenses. Although the UAE Civil Procedures Code allows a successful party to claim legal expenses from the other party this is rarely put into practice in the Dubai Courts, whereas the DIFC courts are proving themselves more likely to apportion expenses in favour of the successful litigant.

    Regardless of the scope of the jurisdiction of the ADGM courts, the tribunal shall be a "court' in the tradition sense – namely a forum in which disputes are heard by a judge or panel of judges, and an executable judgement handed down. The details of any presiding judges are yet to be released, but it is of note that DIFC seats a number of internationally-acclaimed judges, qualified in a number of jurisdictions including the UAE. However despite the prevalence of traditional litigation as a common dispute resolution mechanism, agreements between parties to refer disputes to arbitration have increased dramatically (particularly in joint venture agreements, given that arbitration is the dispute resolution mechanism favoured by parties to construction contracts using FIDIC models). The inclination towards arbitration incentivized DIAC to establish its own arbitration centre, the DIFC LCIA Arbitration Centre, founded as a strategic partnership between DIFC and LCIA and operating under the rules of the latter. However in May 2014 Law Number 7 of 2014 announced the establishment of a central Dispute Resolution Authority within DIFC – namely, a singular body creating a "one-stop shop" for dispute resolution by uniting the three independent centres (the DIFC courts, DIFC LCIA Arbitration Centre and Dubai World Tribunal), presided over by the current president of the DIFC courts. No timeline for this unification has been announced, but it remains to be seen what position the ADGM will take with regards to arbitration. Although it may do well to heed to approach soon to be adopted by DIFC, it may be that the mergence of centres therein leaves space in the market for an independent arbitration centre within a financial centre.

    Despite the fact that the ADGM's proposed legal system differs greatly from that of the UAE it bares striking similarities to that of DIFC in many respects. Given DIFC's high ranking in the world league of financial centres, it seems reasonable to assert that the ADGM is on the right path not only to ensuring its own success, but also to assisting the Emirate of Abu Dhabi in achieving the Abu Dhabi Economic Vision 2030.

     

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    Thu, 05 Feb 2015 00:00:00 GMT
    <![CDATA[Отмененные строительные проекты в Дубае]]> Decree Number 21 of 2013 – One Year Later

    We're all familiar with the story. Mr A buys property off-plan. Developer advises property will be completed by 201X. Mr A awaits handover with anticipation. 201X comes and goes, with no news on the property. Developer or sales agent contact Mr A to advise that construction has been delayed. Some years pass and Mr A sees no further development. Developer and sales agent are unforthcoming. Mr A decides to take legal action. Mr A contacts one international law firm, famed for providing bespoke legal advice and seemless, high-quality counsel…

    Incomplete construction projects are by no means a new phenomenon in Dubai. Indeed, one year ago our legal newsstands were heavy with articles relating to this topic owing to Decree 21 of 2013 (the Decree). Issued on 23 July 2013, the Decree proposed a system for the management of litigation cases filed as a result of cancelled construction projects. In summary it provided for the formation of a special judicial committee (the Committee) to rule on cases in which the developer of an officially-cancelled construction project has failed to refund the purchasers' money. Although Article 11(5) of Law Number 13 of 2008 (Law 13) gave the Real Estate Regulatory Authority (RERA) the authority to annul delayed construction projects, and Executive Council Resolution 6 of 2010 (the Council Resolution) laid out the circumstances, conditions and procedures for such cancellation, further attention was needed to ensure the streamline settlement of all outstanding dues and enforcement of the parties' rights. Article 27 of the Council Resolution states that should a developer fail to reimburse a purchaser within a timeframe established pursuant to the same Resolution then RERA shall take all measures to ensure that the rights of the purchaser are upheld – an obligation which may necessitate RERA referring the matter to the "competent judicial authorities". The Decree goes further to name the "competent judicial authority" as the Committee.

    We know what you're thinking –"this is a news letter, not a history letter". So why are we writing an article on an arguably stale, old topic? The reason is this: although July – September 2013 brought to us the promise of a reformed litigation system for the relevant cases and a plethora of publications on the subject, we have seen no practical changes to date. Article 9 of the Decree makes clear that the provisions shall have effect from the date of publication in the Official Gazette, which occurred on 10 September 2013. Clear guidelines were in place regarding the constitution of the Committee – namely that each panel should consist of at least 3 judges from the Dubai Courts pursuant to Article 1 – and Articles 3 and 5 take measures to ensure that the Committee has exclusive and undisputable jurisdiction over the specified matters. Yet although such concise provisions govern the actual working of the Decree, no date has been set for the diversion of cases into the new system. This is despite the fact that Article 3 states that all judgements issued prior to the commencement of the Committee's work must (not "may") be referred to the Committee for consideration nonetheless.

    It may therefore seem as though the workload of the Committee is already building up and, as we are all aware, the cancellation of construction projects is no rare occurrence in Dubai. However purchasers wishing to refer their relevant disputes to the appropriate authority remain without the guidance of precedent or knowledge of the way in which decisions will be made by the Committee, and several questions remain unanswered. What would happen, for example, if a developer claims that it intends to re-commence works on a project? Or what if the developer wishes to sell the land?

    In answering these questions we should remember the purpose of the Committee. As per Article 2A of the Decree, this is "to consider and decide such issues, demands and claims that may arise between real estate developers and purchasers, whose subject matter or cause is CANCELLED real estate projects". Cancelled. Not delayed, stalled or suffering setback, but officially and permanently cancelled. And the authority to enforce cancellation is not the power of the Committee but the power of RERA as per Law 13 and the Council Resolution. If cancellation is imposed by RERA pursuant to the conditions prescribed by Article 23 of the Council Resolution then under Article 24 the developer shall have 7 days to appeal against the decision to RERA. RERA shall then have a further 7 days to consider the same and deliver a final verdict. If the decision remains the same and the project is cancelled RERA must meet the provisions of Article 25 – namely appoint an auditor (and the cost of the developer) and ensure that any monies in the escrow account are refunded to purchasers within 14 days. If the account contains insufficient funds to fully reimburse a purchaser the developer shall be afforded 60 days (and any such extension permitted by RERA) to provide purchasers with their money.

    We have already established that Article 27 of the Council Resolution provides that should a developer fail to reimburse a purchaser then RERA must refer the case to the appropriate judicial authorities (namely the Committee) for the enforcement of the same. We have further clarified that, under Article 2A of the Decree, the Committee's field of focus shall be disputes arising between the developer and purchaser as a result of the cancelled project. It therefore follows that the Committee has no jurisdiction in cases whereby the developer is challenging the cancellation of the project. These are matters for RERA, who have exclusive authority over whether or not a project is to be cancelled. So to revert to our earlier questions – what would happen if a developer wished to re-commence development on a project or wanted to sell the land? If the escrow account proved to be sufficient to reimburse purchasers and other outstanding dues can be settled without the sale of the land, then post-settlement the developer shall surely be free to dispose of the land however he so choses. And if RERA have ruled that a project is to be cancelled the developer has no other authority to whom to appeal. His only other option regarding re-commencement of the project shall be to apply afresh to RERA at a later date.

    So if RERA are the sole body with the power to cancel a project and the Committee shall not have the authority to overturn the decision, what are the duties of the Committee? Article 2A of the Decree further clarifies that the Committee shall have the power to liquidate projects cancelled by RERA. Therefore if a purchaser approaches the Committee with the grievance that the developer has not refunded his money in accordance with Articles 25 and 26 of the Council Resolution the Committee may consider the following: should liquidation be effected and, if so, how should the funds be allocated? In addition to taking into consideration the purchaser's right to a refund the Committee shall also need to consider contractors, sub-contractors, suppliers, service providers and any other party with a claim to interest.

    Let us revisit Mr A. In the instance that the construction of his property has been cancelled by RERA and the developer has not refunded his money, what will happen? When the Committee becomes operational it shall have the authority to order the developer to reimburse him. And if the developer isn't sufficiently solvent to do so, it may order liquidation and allocate the resulting funds in the appropriate proportions – which may or may not involve the payment of Mr A. The obvious question here is "but what if Mr A receives nothing"? Unfortunately for Mr A he will have no further options. Pursuant to Article 5 of the Decree the Committee's decision is final and binding there shall be no further right to appeal.

    So what are the advantages of this new system? In the happier circumstance that the Committee is able to allocate Mr A his dues then under Article 5 the decision may be enforced by the Execution Section of the Dubai Courts, and to Mr A's relief Article 9 states that any matters handled by the Committee shall be exempt from any court fee.

    Of course, Mr A will still need to pay his representatives' professional fees – but fortunately for him, the aforementioned international law firm approached offer excellent competitive rates…

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    Thu, 20 Nov 2014 12:00:00 GMT
    <![CDATA[Arbitration in the UAE]]> Любые обсуждения последних событий в области гражданского судопроизводства должны обратиться к виртуальной революции, которая имела место в отношении альтернативных методов разрешения споров. Само собой разумеется, что правовая система наблюдает устойчивый рост обращений к Альтернативным Методам Разрешения Споров (АМРС). АМРС претерпели значительный рост и все чаще включаются в судебный процесс. Такие альтернативы теперь рассматриваются как способы, чтобы облегчить нагрузку на судебно-правовую систему и для оказания помощи сторонам в быстром разрешении их споров, с меньшими затратами и удовлетворительными результатами. .

     

    В двух предыдущих статьях я подробно обсуждал вопросы, касающиеся арбитражной системы в Объединенных Арабских Эмиратах. В первой статье обсуждалось намерение законодательного органа ввести арбитраж в качестве альтернативной формы разрешения споров между двумя и более сторонами. Во второй статье рассмотрены последствия арбитражного решения, обязательный характер этого решения, причины, необходимые для оспаривания арбитражного решения и заявления об отмене на основе – 1) арбитражных соглашений; 2) арбитражного разбирательства.

    В настоящей статье мы продолжим исследовать арбитраж в контексте принципа делимости и недействительности контрактов. Последующая серия будет охватывать и другие формы разрешения споров, которые исходят из объема работы арбитража, а также охватят разницу между арбитражем, примирением и другими формами разрешения споров.

    Поскольку АМРС получают известность в судебных, научных и коммерческих кругах, то они также привлекают к себе внимание критиков. Например, некоторые критики могут возразить, что АМРС не решает реальные проблемы правовой системы. Они бросают вызов понятию, что такие альтернативы являются более эффективными, чем судебный процесс, ставя под сомнение, действительно ли это экономит время, и оспаривая заявленную судебную перегрузку. Некоторые утверждают, что АМРС создают этические проблемы для юристов-практиков, в то время как другие опасаются, что такой процесс может быть предвзятым и не нейтральным.

    Начнем с того, что мы обсудим правила прецедента, установленные Кассационным судом по решению, влечет ли недействительность договора автоматическую недействительность арбитражного решения. Кассационный суд признал доктрину раздельного подхода (Доктрина) в данном случае и постановил, что арбитражный пункт в контракте отделен от основного контракта (за исключением, если арбитражное решение приводит к нарушению общественного порядка). Гражданско-Процессуальный Кодекс ОАЭ напрямую не относится к доктрине, но это же было принято в Арбитражном Регламенте Дубайского Международного Арбитражного Центра в 2007 году в соответствии с пунктом 6.1 вышеуказанных правил, гласящих следующее:-

    "«Если иное не согласовано сторонами, Соглашение об Арбитраже, которое образует или призвано быть частью другого договора не может считаться недействительным, несуществующим или неэффективным, потому что это другое соглашение является недействительным, несуществующим или стало неэффективным, и Арбитражное соглашение в этом случае рассматривается как отдельное соглашение»."

    В вопросе, поставленном перед Кассационным судом Дубая (обращение номер 164 от 12 октября 2008 года) договор субподряда от 23 декабря 2004 года был предоставлен для арбитража. В соответствии с пунктом 13 указанного договора было предусмотрено, что любые споры или разногласия, которые могут возникнуть между сторонами, должны быть решены мирным путем, и если мирное решение невозможно, такой спор или разногласия должны быть переданы в арбитраж.

    Суд в данном случае должен был принять решение о действительности арбитражной оговорки путем рассмотрения, имел ли управляющий директор общества с ограниченной ответственностью полномочия связывать компанию с арбитражным судом. В итоге, суд подтвердил, что менеджер компании действительно имел право связывать компанию с арбитражем. Для этого суд указал, что если учредительным документом компании (а именно меморандум и устав) предоставляются широкие полномочия менеджеру компании, этот менеджер имеет законное право принимать любые меры и осуществлять любые действия, которые он сочтет целесообразными и в интересах компании. При наличии широких полномочий, возложенных на управляющего директора в соответствии с учредительными документами, требование получения специальной доверенности для инициирования арбитражного разбирательства очень формально..

    Кроме того, принимая во внимание концепцию нарушения, аргумент, что недействительность контракта не влияет на арбитражную оговорку идет вразрез другому правилу, принятому Кассационным судом (Номер апелляции 61 от 11 апреля 2010 года; недвижимость), которое устанавливает, что недействительность договора делает все пункты недействительными (в том числе неустойки и пункты о компенсации, поскольку аннулирование или расторжение договора приводит к его отмене, включая штрафные санкции). Суды постановили, что в случаях, когда договор расторгается по договоренности или судом, тогда договор уже не может быть исполнен, и позиции сторон будут восстановлены до вхождения в соглашение. Как следствие, все, являющееся частью договора перестает существовать, включая все обязательства без ограничений, пени и компенсации. Суд основывает свое решение на статье 274 Гражданского Кодекса, которая звучит как:-

    "«Если контракт отменен автоматически или по решению обеих сторон, обе договаривающиеся стороны восстанавливаются в положении, в котором они находились до заключения договора. В случае, если это не представляется возможным, должна быть выплачена компенсация»."

    Обзор двух вышеупомянутых решений предполагает, что существует противоречие, выраженное в двух предыдущих решениях, принятых Кассационным судом. Решение о выплатах штрафа и компенсации предполагает, что если контракт становится недействительным, кредитор получает определенные права в отношении должника, который нарушил договор, в то время как арбитражная оговорка не имеет такой независимости. Кроме того, принцип разделимости, принятый в арбитражном постановлении, не был принят в вышеупомянутом вопросе. Разница этих двух решений требует дополнительных разъяснений.

    Несмотря на то, что корпоративные, коммерческие, финансовые и другие вопросы могут быть переданы в арбитраж, стороны не могут к нему обратиться для разрешения споров, если дело касается:-

    Уголовных преступлений и вопросов, затрагивающих общественный порядок: криминальные вопросы не могут быть предметом арбитражного рассмотрения. Соответственно, если в ходе арбитражного разбирательства одна сторона поднимает возражение со ссылкой на подделку документов или уголовного дела в отношении подделки или других актов, судья должен приостановить производство по делу до вынесения решения по этим уголовным делам.

    Вопросов, в которых примирение не представляется возможным: арбитаж споров, которые являются непримиримыми, невозможен. Соответственно, вопросы личного характера, такие как замужество или развод, вопросы, в которых лицо хочет приобрести гражданство, вопросы, касающиеся прав несовершеннолетних, вопросы нарушения общественного порядка, и срочные вопросы, которые не могут быть предметом арбитражного разбирательства.

    В нашей следующей статье мы рассмотрим другие виды разрешения споров, включая медиацию и примирение, и сравним эти альтернативные формы с арбитражем в контексте законов ОАЭ, с учетом прецедентов, принятых судами.

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    Wed, 24 Sep 2014 12:00:00 GMT
    <![CDATA[корпоративная реструктуризация и спин-офф]]>Говоря простыми словами, изменение означает переход одного состояния в другое. Хотя «изменение» довольно общее понятие и может иметь как положительную, так и отрицательную коннотацию, вероятность положительного и оптимистичного исхода «изменений» не всегда может быть предопределена. Однако хорошо продуманные и планируемые перемены могут привести к положительному результату, если все идет по плану   В корпоративном праве в компании могут наблюдаться изменения в структуре при прибавлении или уменьшении уставного капитала. С коммерческой точки зрения, компания меняет свою бизнес-модель или подвергается внутренней реструктуризации для достижения желаемых целей. Один из аспектов корпоративной реструктуризации – это образование новых предприятий (спин-офф), который набирает обороты в ОАЭ и других странах Персидского Залива. Компании пришли к пониманию и осознали основную идею спин-офф в отделении бизнес-единицы более крупного юридического лица и установление его в качестве отдельного бизнеса. Фирмы осуществляют слияния и поглощения в соответствии с понятием, что компании после слияния образуют новую единицу, чья рыночная оценка будет больше, чем сумма ее составляющих. Точно также образование дочерних предприятий, как правило, связано с общим увеличением стоимости, как например, всплеск цен на акции, улучшение финансовых показателей и т.д.    Чтобы проиллюстрировать вышесказанное, приведем пример: компания АВС занимается производством технологического оборудования для нефтяной и газовой промышленности, в области строительства нефтебаз, сосудов под давлением, трубопроводов, теплообменников и другого специализированного оборудования. С течением времени АВС создала бизнес-подразделение, осуществляющее техническое обслуживание и ремонт нефтяных вышек, которое продемонстрировало беспрецедентный рост прибыли для АВС. Командой менеджмента АВС единогласно было принято решение во время ежегодного общего собрания о выделении подразделения по обслуживанию буровых установок в новое юридическое лицо JKL. Это решение стало результатом нескольких ключевых вопросов, в том числе будущей продажи бизнеса, эффективного управления и независимой оценки бизнес-единицы в качестве нового объекта.   Такие сделки, как выделение дочернего предприятия, обычно являются результатом привлекательных подсчетов разнообразного расширения. Хотя эмпирические данные могут предлагать множество преимуществ таких сделок, именно реализация и выполнение может быть сложной задачей. В большинстве юрисдикций сделки спин-офф должны пройти через налоговых консультантов, адвокатов, проектную группу и, наконец, согласование с властями.   Отделение подразделения компании в ОАЭ требуют детального планирования, и компании должны проявить высокую степень осторожности до фактического осуществления разделения. Закон о Коммерческих Компаниях ОАЭ (Федеральный Закон №8 от 1984 года, с поправками) регулирует деятельность иностранных предприятий в Дубае, и свободные экономические зоны регулируются в соответствии с их внутренними правилами. Несмотря на то, что создание компании в Дубае или ОАЭ может быть одним из самых простых и привлекательных вариантов для инвесторов, спин-офф включает в себя несколько ключевых решений менеджмента по вопросам, связанным с передачей земельных участков или недвижимости, администрацией и назначением аренды, передачей научно-технических знаний, составом акционеров, назначением ключевого управленческого персонала, разрешением регулирующих органов, переходом сотрудников, передаче интеллектуальной собственности, это только некоторые из них.   В одном из недавних случаев компания с ограниченной ответственностью, занимающаяся товарами массового потребления, решила отделить подразделение по продаже одежды в самостоятельную структуру. Первоначальная проверка предположила, что отделение магазина одежды может быть практически несложным. Тем не менее, в ходе полной экспертизы были подняты вопросы относительно присвоения франшизы, открытия новой единицы на территории фризоны, распределения непосредственных обязанностей, относящихся к магазину одежды и перевод почти 7000 сотрудников из нынешней компании в новую. Отделение дочерней компании может повлиять на рейтинг, а также на цены на акции, если компания намерена отделить свой основной блок бизнеса, что может вызвать вопросы о значимости первоначальной компании после отделения основного блока. Хотя комплексная правовая и финансовая экспертиза может спасти от нежелательных сюрпризов, должное внимание должно уделяться информационным системам управления и связанных с ними источникам.   Компании в ОАЭ может понадобится разделение акционерного капитала в вопросах, связанных с приглашением в публичное размещение акций (IPO). Например, Дубайский Финансовый Рынок (DFM), который осуществляет свою деятельность в соответствии с правилами и положениями DFM и Управления Ценных Бумаг и Товаров ОАЭ (SCA) требует от фирм, заинтересованных в IPO, публичного размещения минимум 55% доли акций    Недавно, в марте 2014 года, один из основных застройщиков в Дубае решил отделить свой бизнес, связанный с торговым центром, и его доход вырос до 2,5 биллионов долларов.   С течением времени отделение дочерних компаний начало набирать темп, когда большинство компаний пытается отделить свои непрофильные виды деятельности, чтобы не только сосредоточиться на основной деятельности, но и оптимизировать свои непрофильные работы. Отделение дочерних компаний также обеспечивает иммунитет от проблемных активов и помогает компаниям не быть подверженными влиянию долгов и обязательств друг друга в пределах группы.   Очень важно наметить четкий план, который будет не только давать представление о доходах и расходах компании, но и иметь план действий на будущее этой компании, иначе отделение может в конечном итоге обратиться в катастрофу.   Спин-офф является способом повышения стоимости компании, но, если он не выполняется должным образом, то может оказаться массовым разрушителем вместо золотого дна.  

     

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    Mon, 22 Sep 2014 12:00:00 GMT
    <![CDATA[Private Joint Stock Companies and UAE Law]]>

    Private Joint Stock Companies and UAE Law

    When the weather changes, nobody believes the laws of physics have changed. Similarly, I don't believe that when the stock market goes into terrible gyrations its rules have changed.- Benoit Mandelbrot

    The UAE economy in the wake of the financial crisis continues to inspire positive sentiments amongst investors, entrepreneurs and the residents. It is constantly fuelled by low-interest rates and lucrative investment opportunities which when combined with the willingness of local and international companies to test the waters in the Middle East by establishing in UAE stands testament to its unprecedented growth. The winning bid for Expo 2020 is another witness to the UAE being slated as the desired international business nucleus. In recent years, UAE has observed a rapid appreciation in the real estate sector, locally owned companies being listed on the world's stock exchanges and record breaking deals in retail, investment and banking sector.

     

    In a historic move, equity index compiler Morgan Stanley Capital International upgraded UAE to an emerging market. This move is expected to attract a large institutional portfolio investment in the UAE. A successful privately owned business deems floating shares on the stock market as the most natural way of progression. A number of concerns that surround the process of being listed include but are not limited to the expansive process relating to the Initial Public Offering (IPO) which is followed by a thorough scrutiny of the disclosures and an extensive list of requirements by regulating authorities for each of the exchanges. In the UAE, the current Commercial Companies Law (being Federal Law Number 8 of 1984) the CCL lays down certain precise requirements that have previously deterred investors and their interest in listing their company on a UAE stock exchange.

     

    The year 2013 saw UAE's federal government passing a new draft for the Commercial Companies Law with certain clemencies being awarded towards the requirements for a public joint stock company. The draft of the new law spells out welcome additions to the existing law as it introduces the provision for sale of pre-emptive rights to a third party or an existing shareholder. The new draft also provides for share capital to be in form of authorized and issued share capital. A notable feature of the new draft is the provision of an employee incentive scheme allowing the employees to subscribe to shares of the company. The draft reduced the number of founding partners to five (5) instead of the previously required ten (10). In the same draft though, the minimum capital requirement for a public joint stock company was increased to AED 30 million. That being said, the draft law has not been enacted and remains under consideration.

    In an initiative to relax the present regulations surrounding the Initial Public Offering and listing of companies on the UAE stock exchanges, the regulatory body for Dubai Financial Market and Abu Dhabi, the Securities and Commodities Authority (SCA) has introduced SCA Board of Directors Decree No. 10 of 2014 Concerning the Regulation of Listing and Trading of Shares of Private Joint Stock Companies (the Decision). The Decision is aimed at encouraging Private Shareholding Companies to be list their shares and increase capital injection and shareholder liquidity.

    Pursuant to the Decision, Private Joint Stock Companies can now be listed on a UAE stock exchange subject to fulfillment of the requirements specified under the Decision. A private shareholding company (as defined under the CCL), can now list its shares on the stock market once the board of directors approve the same and the following requirements are met:

    i)                 the share capital of the company is fully paid up;

         ii)                 the company submits audited budget for the last two financial years as per the prescribed international standards;

    iii)               there are at least 30 shareholders at the time of listing; and

    iv)               the shareholder equity is not less than the capital equity.

     

    A Private Joint Stock Company fulfilling the above requirements needs to pay consideration to the legal requirements involved in the listing process. The Decision provides greater flexibility by doing away completely with the IPO process for a Private Joint Stock Company and therefore allowing the shareholders to sell their shares soon after the listing process. However, the legal requirements for listing process need to be met and have not been done away with. These include approval of the SCA, company's constitutive documents to be submitted with an exhaustive detail of company's background and finally with the submission of the prospectus. The disclosure requirements have remained similar with not much altercations.

    The UAE capital markets have recovered marvelously from the dry spell it was experiencing. The onslaught of the third quarter of 2013 saw the markets gain significant momentum. If a report published by an international audit firm is to be believed, the capital raised in the country and the wider MENA region saw the highest levels in 2013 since 2008. With the SCA's Decision to open gates of capital market for private joint stock companies, activities on the UAE stock exchange will captivate interests of locally held private joint stock companies. The further onset of Expo2020 has instilled hopes in many international businesses for further relaxations from the SCA to enable them to list their shares on UAE stock markets, however this remains a point of speculation. 

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    Fri, 05 Sep 2014 01:00:00 GMT
    <![CDATA[Цвет, цвет, цвет! Регистрация торговых марок цвета.]]>

    Tippy tippy tap…Каков ваш цвет??

    Черная тоска, покраснеть от гнева, позеленеть от зависти при виде соседской голубой машины… Цвета используются для описания эмоций мы испытываем, и они крайне важны в мире, в котором мы живем. Цвета, как известно, могут успокаивать или раздражать, повышать давление и даже подавлять аппетит. Цвета – это убедительная форма общения. Повсеместно красный означает «Стоп», зеленый – разрешение идти и сигналы светофора во всем мире имеют одинаковое значение. Мы постоянно находимся под влиянием цветов, и это является фактом, что они вызывают некие реакции в нашем подсознании и заставляют нас любить или не любить что-то, купить или не купить определенный продукт. Неудивительно, что цвета имеют большую важность, и все большее значение приобретает их использование в товарных знаках. Теория ограниченности цветов, согласно которой существует ограниченное число цветов в цветовой палитре, используется для запрета защиты цвета. Целью запрета было противостояние монополии на использование цвета, которая бы препятствовала конкуренции.

    В 1949 году суд США отказался защитить цвета логотипа супа Campbell, красный и белый, заявив, что это будет означать монополизацию красного цвета. Как уже говорилось в нашем предыдущем выпуске, цвета, и запахи, не самый простой предмет, когда речь идет о товарных знаках.

    Исторически, процесс защиты цвета посредством регистрации товарного знака был сложным, так как цвета часто не являются достаточно различительными. Но это было исправлено в 1994 году, когда вступило в силу международное соглашение под эгидой Всемирной Торговой Организации, устанавливающее минимальные стандарты для регулирования ряда объектов интеллектуальной собственности. Это соглашение более известно как соглашение TRIPS (Торговые аспекты прав интеллектуальной собственности), и оно является наиболее всеобъемлющим международным соглашением об интеллектуальной собственности. В последние годы каждая страна предоставила свою точку зрения и понимание этого международного соглашения и рассматривает заявки на регистрацию товарных знаков цвета на индивидуальной основе.

    Некоторые детали должны быть приняты во внимание перед регистрацией цвета как торговой марки. Некоторые из них подробно обсуждаются ниже. Регистрация торгового знака цвета требует детального описания используемого цвета, кроме случаев, когда невозможно адекватно описать цвет. Ссылки на уже принятые стандарты описания цвета, как система Пантон, принимаются и могут потребоваться в офисе регистрации. Для того, чтобы квалифицироваться как товарный знак, цвет или сочетание цветов должны дополнять товар заявителя, и должны восприниматься широкой общественностью как цвет, определяющий и ассоциирующийся с товаром, для которого они используются. Один цвет, как правило, не имеет достаточной уникальности для регистрации, но возможно, что он приобрел отличительные черты через прошлое использование. Это проще для цветовых сочетаний, поскольку они, вероятнее, будут более отличительными. Еще одно соображение, которое регистрирующий орган примет во внимание, это отсутствие функциональности цвета. Крайне важно, чтобы заявитель удовлетворял условию, что регистрируемый цвет не является функциональным и общим для товаров и/или услуг, которые предоставляются заявителем. Заявитель должен быть в состоянии доказать, что регистрируемый цвет не требуется конкурентам, производящим подобные товары или услуги.

    Решение о наличии необходимого отличия при регистрации зависит от оформления марки, включая цвет. Давайте проиллюстрируем это на примере: квадрат, разделенный на четыре части, окрашенные в разные цвета, может обладать достаточной отличительностью без необходимости демонстрировать приобретенные отличия. С другой стороны, те же четыре цвета по отдельности, без квадратного дизайна, не будут иметь достаточного влияния при регистрации и понадобится поддержка прошлого опыта их использования для регистрации.

    В Австралии конкретный оттенок цвета может действовать как товарный знак, однако, процесс регистрации не легок. Вы должны продемонстрировать, что использовали цвет как товарный знак, и общественность уже ассоциирует этот цвет с вашим товаром или услугой. Торговые марки с комбинацией цветов легче регистрируются, так как необходимость их использования другими может быть довольно редкой.

    В Европейском Союзе в статье №4 Постановления Совета сказано, что знак может быть представлен в графическом виде, при условии, что приведенные знаки способствуют различению товаров или услуг одного предприятия от других компаний. В 2003 году Европейский Суд повторяет критерии из случая Sieckmann V немецкого патентного бюро (дело С-273/00)[3] что графическое представление торговой марки, предпочтительно с помощью изображений, линий или символов, и данное представление должно быть ясным, четким, законченным, легко доступным, понятным и объективным. Это определение в целом охватывает торговые марки цвета, и поэтому заявитель на торговую марку Сообщества или национальную торговую марку на территории ЕС может определить цвет товарного знака, используя международную шкалу цветов RAL или системе определения цвета Пантон.

    В Объединенном Королевстве Великобритании в 2012 году Верховный Суд, Суд Канцелярии постановил, что цвет может быть зарегистрирован в качестве торговой марки. Марка Cadbury подала заявку на регистрацию фиолетового цвета, который является синонимом ее шоколада с 2004 года. Nestle опротестовал это заявление, и два гиганта обнажили шпаги в сражении в суде. В историческом поражении в 2013 году Апелляционный Суд отказал в регистрации фиолетового цвета на том основании, что Nestle были высказаны возражения. Nestle не оспаривали регистрацию в отношении отличительности, но утверждал, что знак Cadbury не является знаком, способным быть представленным графически, и поэтому не возможным для регистрации в соответствие с актом 3 (1)(а) Закона о Товарных Знаках 1994 года. Требование графического представления заключается в том, что торговая марка должна быть ясной, четкой и объективной. Кроме того, аргументом Нестле было, что неопределенность заявки на товарный знак Кэдбери может привести к злоупотреблениям на рынке и антиконкурентным эффектам.

    В Соединенных Штатах Америки Верховный Суд США постановил, что цвет может быть использован в качестве торговой марке в случае Qualitex против Jacobson Products Co. Владелец товарного знака должен доказать, что заявленный цвет приобрел основательные отличительные черты, и также цвет указывает на товары, к которым он применяется. Следует иметь в виду, что наряду с доказательством отличия графического представления, Патентное Ведомство США также требует доказать отсутствие функциональности, прежде чем рассматривать регистрацию цвета в качестве товарного знака. Для дальнейшей информации о регистрации товарных знаков, пожалуйста ознакомьтесь с руководством по регистрации на нашем сайте. Регистрационный орган в ОАЭ впервые зарегистрировал цвет в качестве товарного знака в 2007 году, это был особый оттенок оранжевого, используемый компанией Марс Инкорпорейтед для рисовых продуктов Uncle Ben’s. Федеральный Закон ОАЭ о товарных знаках определяет «товарный знак» как «то, что принимает характерную форму, будь то имена, слова, подписи, буквы, цифры, рисунки, символы, названия, акцизные марки, печати, фотографии, надписи, реклама, упаковка или любые другие знаки или их комбинация». Основываясь на этом определении товарного знака и принимая во внимание, что Марс уже зарегистрировал оранжевый цвет Uncle Ben’s в ряде других юрисдикций, ведомство по товарным знакам ОАЭ последовало этому примеру и зарегистрировало цвет. Это сделало оранжевый цвет Uncle Ben’s первой зарегистрированной товарной маркой одного цвета.

    В Бразилии, Южной Корее, Китае, Тайване, Японии и Мексике внутреннее законодательство не допускает отдельных цветов для регистрации в качестве товарных знаков.

    Цвета играют большую роль в нашей жизни и имеют неотъемлемую ценность. Научные исследования доказали, что цвета могут изменить наш темперамент. Производители во всем мире стремятся защитить от чужого использования свои цвета, чтобы они ассоциировались у покупателей с их продукцией. Существует ряд сложностей в этом вопросе, но в целом, это возможно.

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    Wed, 16 Jul 2014 12:00:00 GMT
    <![CDATA[Не смей красть мой Запах… торговые марки ароматов]]> Что такое запах? Это одно из пяти чувств восприятия. Человеческий мозг по разному реагирует на разные запахи. Запах абстрактен и часто связан с неким абстрактным понятием, как например запах успеха или запах опасности. «Роза пахнет розой, хоть розой назови её, хоть нет» - Шекспир, Ромео и Джульетта (2:2)

    Говоря о запахе, новое изобретение в этой области было открыто только недавно. Разработка команды из Бристоля представляет собой мультисенсорную систему, названную "SensaBubble", способную генерировать ароматы, донося разную информацию до людей и воздействуя на разные чувства. Новый патент компании PepsiCo (Регистрационный номер WO2013032631 A1, от 7 марта 2013 года) зарегистрирован на капсульный аромат, придающий напитку Pepsi живой и бодрящий вкус.

    Дальнейшее развитие в области науки и биотехнологий откроет в ближайшем будущем множество изобретений, использующих запахи, но возникает вопрос, можно ли как-то защитить права на тот или иной аромат?

    Закон об интеллектуальной собственности имеет дело с технологическими инновациями и защищает настолько, насколько это возможно, изобретение и экономические интересы с ним связанные. Соответственно, закон об интеллектуальной собственности предлагает 3 основных типа защиты: патент на изобретения, регистрация торговых знаков, которые можно воспроизвести графически и авторские права – для защиты литературных, художественных и научных работ. Закон ОАЭ также включает в себя защиту авторских прав звукового и видео контента (Закон №7 от 2002 г. с поправками), но в данный момент невозможно зарегистрировать запах согласно закону об интеллектуальной собственности ОАЭ. Единый закон стран Персидского Залива о регулировании торговых марок находится в стадии принятия, в то время как в Бахрейне он уже вступил в силу. Дальнейшие положения готовятся к рассмотрению, и хотя ОАЭ одобрило принятие этого закона, он еще не вступил в силу. В ОАЭ располагаются тысячи пятизвездочных отелей, лучшие мировые бренды парфюмерии, и все более растущее число компаний и фирм, которые занимаются бизнесом в сфере ароматов и парфюмерии, ориентируясь на местный и международный рынки. Хотя ситуация с законом об интеллектуальном праве ясна из вышесказанного, эти компании могут быть заинтересованы в регистрации своих ароматов на зарубежных рынках, и в этом случае встает вопрос, как должны быть зарегистрированы эти ароматы, как торговая марка, патент или авторское право, и, во-вторых, какая юрисдикция будет регулировать эти вопросы..

    Давайте начнем с торговой марки и разберемся: 1) под какую юрисдикцию подпадают запахи, зарегистрированные как торговая марка; 2) точные требования, предъявляемые к законодательству соответствующих стран. В сущности, традиционные торговые марки обеспечивают защиту логотипов, слов или графических изображений, относящихся к товарам или упаковкам товаров. Однако, нетрадиционные торговые марки могут включать в себя цвет, запахи, звуки, вкусы, чувства  или движения и т.д. Торговые марки, регистрирующие запах, часто называют обонятельными

    Термин «обонятельный» берет свое начало из медицины. Носоглотка покрыта слизистой оболочкой, содержащей чувствительный эпителий, также называемый обонятельный эпителий. Эпителий состоит из эпителиальных клеток, содержащих пигмент, который поглощает излучения, например, инфракрасные, и клеток-рецепторов, которые имеют узелки над поверхностью эпителия, из которых выходит 8-20 обонятельных волосков. Эти волоски содержат обонятельные рецепторы..

    Вопреки ожиданиям, регистрация торговых марок в виде запаха не имела значительного успеха. Одна из возможных причин это то, что температура, уровень влажности, состояние ветра во многом могут повлиять на интенсивность и на сам аромат. Несколько попыток зарегистрировать марки на международном уровне было сделано в прошлом, но они не имели большого успеха. В Великобритании наглядными примерами являются «цветочный запах, напоминающий розу по отношению к автомобильным шинам» (№2001416) и «устойчивый запах пива для стрел для дартса» (№2000234). Обе регистрации были поданы 31 октября 1994 года (в первый день вступления в силу закона о Торговых марках) и были первыми зарегистрированными марками подобного типа .

    Закон о Торговом Праве Австралии определяет торговую марку как «знак, используемый для того, чтобы выделить предлагаемый товар или услугу в ходе торговых операций….» Часть 6 Закона проясняет, что этот знак может включать следующее: любую букву, слово, имя, подпись, число, прибор, бренд, заголовок, марку, билет, вид упаковки, форму, цвет, звук или аромат. Соответственно, Мистер Си из компании JKL Perfumes из ОАЭ может зарегистрировать свою торговую марку в Австралии. Заявление на регистрацию торговой марки должно включать графический рисунок этой марки. Также это может быть вербальное описание аромата, например «аромат сосны». Мистер Си, однако, в данном примере не сможет зарегистрировать ароматы, если это 1) натуральный природный запах; 2) маскирующий аромат; 3) запах, уже используемый в торговле, как например, ваниль, шоколад, эвкалипт или запах лимона.

    Правительство Канады недавно представило Билль С-31 как экономический план действий 28 марта 2014 года. Билль С-31 включает поправки к 40 законам. Предшественниками данного Билля были Билль-8 и Билль-56 от 1 марта 2013 года «О противодействии контрафактным товарам». Билль-31 изменил определение торговой марки так, что она теперь включает запах, звук, вкус и текстуру. Мистеру Си повезло!!

    Интересно отметить, что название Гонг-Конг означает «гавань ароматов». Постановление о регистрации торговых марок Гонг-Конга (Глава 559) разрешает регистрацию ароматов. Более того, Департамент Интеллектуальной Собственности Гонг-Конга всячески поощряет регистрацию торговых марок в виде запаха. Запахи могут быть описаны в форме «запах только что скошенной травы»".

    Офис Регистрации Интеллектуальной Собственности в Южной Африке (CIPRO) в 2009 году выпустил практические рекомендации относительно регистрации нестандартных торговых марок (Журнал Патент №2, сборник 42, февраль 2009 года). Эти рекомендации содержат четкие процедуры по регистрации. Хотя Закон о Торговых Марках (№194 от 1993 г.) может показаться довольно строгим в отношении регистрации подобных марок, все таки это не запрещено.

    Закон о Торговых Марках Морокко разрешает регистрацию запахов в соответствии со статьей 133 раздела 5 Закона об Индустриальной Собственности №17-97 от 2000 г. Вероятно, что Таиланд также рассмотрит регистрацию запахов, однако дальнейшие рекомендации еще ожидаются..

    Другие юрисдикции, где регистрация торговых знаков в виде запаха возможна в соответствии с законом о торговых марках, является Новая Зеландия (секция 5(1) постановление о торговых знаках от 2002 г.) хотя регистрация запаха накладывает некоторые сложности относительно требования о графическом представлении; Сингапур (постановление о торговых знаках не конкретизирует, что есть регистрируемая торговая марка, но указывает на ситуации, в которых она не может быть зарегистрирована; Корея (Статья 2 (1) (С) Постановления о Торговых Знаках позволяет указывать запах для регистрации); Тайвань (Статья 18, Секция I, глава 2). Постановление 486 об Интеллектуальной Собственности (Общественный Закон) также относится к ряду стран региона Анд, включающим Перу, Колумбию, Эквадор и Боливию. Статья 134 (с) называет вкусы и запахи в числе регистрируемых торговых марок. Пример компании PepsiCo  подтверждает возможность регистрации запахов и вкусов в США.

    Во второй части этой статьи мы рассмотрим другие интересные аспекты интеллектуальной собственности. А пока Мистер Си может успешно строить свой парфюмерный бизнес по всему миру..

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    Wed, 21 May 2014 12:00:00 GMT
    <![CDATA[Иджара и Арбитраж]]>

    Вопросы, которые, как правило, широко обсуждаются в настоящее время в бизнес и юридических кругах, относятся к рецессии. Эти вопросы так же затрагивают следующие темы 1) что привело к рецессии; 2) можно ли ее было предотвратить; 3) какой урок можно извлечь из этого прецедента? Например, рассмотрим случай Королевского Банка Шотландии. Рыночная оценка банка стремительно росла до 2008 года, делая его глобальным финансовым локомотивом. Однако, кризис 2008 года изменил его положение и привел к краху с убытками для Британского государства в 32 биллиона долларов. Экономисты и эксперты полагают, что это событие ознаменовало собой величайший провал банковской системы Великобритании. 

    Многие инвесторы в недвижимость на современном рынке обращаются в банк за ипотекой. Громоздкие административные политики банков по борьбе с отмыванием денег и установлению личности клиента оставляют инвесторам мало времени, чтобы внимательно прочитать мелкий шрифт в ипотечных контрактах и понять последствия, вытекающие из обычно используемого финансового модуля, именуемого в исламском финансовом мире Иджара (англ.«Ijarah»).

    Банковский сектор работает по нескольким моделям вертикали, одной из которых является Исламское финансовое дело. Финансовые продукты, предлагаемые в этих рамках, разработаны и структурированы в соответствии с Шариатскими законами. Законы Шариата не зафиксированы в письменном кодексе, но созданы под влиянием религиозных учений и священной книги Коран.

    Говоря более конкретно, иджара означает аренду и оплату. Понятие «иджара» означает продажу права пользованием товаром или услугой за фиксированную оплату. В соответствие с этой формой договоренности, Банк предоставляет своему клиенту возможность пользоваться активами (приобретенными клиентом и профинансированными банком) на определенный период и по определенной цене.

    В Объединенных Арабских Эмиратах понятие «иджара» было связано со сделками с недвижимостью, в которых банки заключали договор аренды вперед для финансирования имущества своих клиентов. Согласно этой договоренности, имущество финансируется банком на долгосрочной основе, а заёмщик выплачивает фиксированную ежемесячную аренду. Арендные договора выстроены таким образом, что по окончании срока аренды, банк компенсирует стоимость недвижимости и получает прибыль. В свою очередь, заемщик получает право собственности на недвижимость путем дарения или соответствующего распоряжения.

    Для иллюстрации приведем пример, инвестор подает иск в арбитражный суд на получение компенсации 12 миллионов дирхам против застройщика, который задерживает сдачу в эксплуатацию коммерческой недвижимости более, чем на 5 лет. Требование компенсации включает затраты по займам, понесенные инвестором, за залог по иджара, взятый в одном из местных банков. В данном случае застройщик поставил под сомнение правоспособность инвестора. Застройщик опирался на договор о продаже (SPA), в котором в графе «Покупатель» был указан залоговый банк. Соответственно инвестор не имел действующего соглашения с застройщиком, и соответственно, у него не было оснований для возбуждения дела в рамках договора о продаже. Юридический вопрос, который возникает из приведенного выше примера, имеет ли право инвестор возбудить дело самостоятельно?

    Статья 258 (1) Гражданского Кодекса ОАЭ гласит – «Критерием в (строительных) договорах является намерение и значение, а не слова и формы». Основная деятельность банков состоит в приеме депозитов и предоставлении займов. В соответствии с договором иджара, банк не имеет намерения взять на себя права собственности на имущество, но выступает в роли финансирующей стороны для обеспечения сделки от имени своего заемщика. Статья 245 Гражданского Кодекса ОАЭ гласит: «В случае коммутативных контрактов для получения выгоды от собственности, при условии, что соблюдены условия их действия, лицо, занимающее имущество, обязано доставить его правообладателю, и правообладатель обязан донести соображения до собственника имущества»'.

    Суд Дубая недавно аннулировал соглашение иджара на том основании, что он представляет собой не договор аренды, а договор купли-продажи, и продаваемое имущество не было завершено в то время, как застройщик начал сбор платежей. Похожее решение было вынесено судом Дубая в 2010 году. В апелляции №268, 290/2209 Дубайский Кассационный Суд установил, что «отношения между сторонами простираются далее, чем написано на бумаге, они находятся на усмотрении судьи, который определяет права каждой из сторон.» Статья 248 Гражданского Кодекса позволяет судье признать контракт недействительным, в случае, если такой договор заключен путем присоединения или содержит несправедливые положения.

    С точки зрения SPA, можно утверждать, что и банк и инвестор имеют аналогичные обязательства. В то время, как банк продолжает выполнять платежные обязательства перед застройщиком, инвестор продолжает выплаты банку в дополнение к оплатам за обслуживание дома и квартиры. Важно отметить, что инвестор имеет интерес в отношении наследства недвижимости, в то время как банк не имеет. Инвестор является фактически правопреемником, и можно утверждать, что существует переуступка права собственности в силу статьи 1109 Гражданского Кодекса ОАЭ. Правопреемники и положения о переуступке являются неотъемлемой частью коммерческих контрактов и присутствуют почти в каждом соглашении. Переуступка осуществляется, когда одна сторона передает свое право третьей стороне, позволяя этой стороне принять обязательства другой стороны. В соответствии с вышесказанным, статья 251 Гражданского Кодекса гласит, что «если договор является источником личных прав, связанных с передачей собственности третьему лицу, то данные права должны быть переданы преемнику в то же самое время, что и сама собственность, если они являются ее принадлежностью, и преемник осведомлен об этих правах на момент передачи»."

    Статья 254 Гражданского Кодекса ОАЭ гласит:

    «(1) Должно быть возможно для лица, при заключении контракта на свое имя, наложить условия, что права должны быть соблюдены в отношении третьей стороны, если она имеет таковую заинтересованность, материальную или моральную.

      (2) Такое условия должно даровать третьей стороне прямое право выполнения этих условий в контракте, позволяя ей их требовать, кроме случаев, когда существует противоположное соглашение, и данное лицо может рассчитывать на любые возражения по отношению к бенефициару, вытекающие из договора.

      (3) Лицо, ставящее условие, может также потребовать выполнения условия в пользу бенефициара, если это не следует из контракта, что бенефициар в одиночку имеет такое право.»"

    Дубайский Кассационный Суд вынес знаковое решение в 2000 году (Договор на поставку и монтаж механического, электрического оборудования и санитарных работ между подрядчиком и субподрядчиком), в котором он постановил, что, если арбитражное соглашение включено в основной договор, и одна из сторон основного договора присваивает свои права и обязанности по такому договору третьей стороне, которая соглашается на эти назначения, будь то в явной или неявной форме, то назначенное лицо заменит назначившее в своих обязательствах в арбитражной оговорке. (Кассационный суд Дубая – Кассационная апелляция №537 1999 – 23/04/2000 гг.)

    Судебные споры, включающие банковские и финансовые претензии, могут показаться тяжелыми и напряженными для некоторых, но суды ОАЭ восстановили настроения инвесторов путем применения буквы закона. .

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    Fri, 16 May 2014 12:00:00 GMT
    <![CDATA[Даже СО2 можно продавать!]]>

    «Поражающие признаки глобального потепления открыли нам глаза на представление о изменении климата. Тающие снежные вершины, беспомощные полярные медведи, ухудшающееся качество воздуха и повышение температуры мирового океана – все это признаки, оказавшие эффект пробуждения на человеческий разум и вызвавшие разговоры о меняющемся лице нашей планеты».

    Правительство США расходится во мнении, когда дело касается изменения климата или последствий глобального потепления. С другой стороны, страны Европейского Союза уже 2 года применяют в тестовом режиме так называемую Европейскую Торговую Систему, программу по минимизации выбросов углекислого газа. Рост цен на энергию имеет глобальное воздействие, и люди обеспокоены, если не испуганы, собственным углеродным производством.

    Рамочная конвенция Организации Объединенных Наций об изменении климата (UNFCC), международный договор с 192 участниками представил Киотский протокол (Протокол), который вступил в силу в 2005 году. Этот договор налагает обязательства на развитые страны по сокращению выбросов парниковых газов, таких как СО2, гидрофтороуглеродов (ГФУ) и перфторуглеродов (ПФУ). Протокол признал, что развитые страны несут главную ответственность за значительные уровни выпуска парниковых газов в атмосфере. Исторически и статистически, США является самым высоким источником выбросов парниковых газов, и хотя они являются участниками протокола, но до сих пор его не ратифицировали. В соответствии с целями Протокола, ряд развитых стран обязались сократить выбросы СО2 и других вредящих атмосфере газов. Эти намерения являются юридически обязательными. Развивающиеся страны не имеют подобных обязательств и целей в соответствии с Протоколом, но обязались значительно уменьшить выбросы углерода. После долгих споров и рассмотрений, было принято странами-членами решение, что продажа квот на выбросы вредных газов является более предпочтительным методом регулирования выбросов углеводорода, чем налогообложение.

    Продажа квот на выбросы  - это название, данное системе контроля за выбросами двуокиси углерода. Эта система основана на предположении, что на данные выбросы устанавливается лимит правительством и международными организациями. Торговля углеродными квотами позволяет развитым странам экономически решать свои обязательства в рамках Киотского Протокола. Им разрешается торговать своими квотами на выброс углерода между собой, а также получать углеродные кредиты для финансирования проектов в развивающихся странах, направленных на сокращение выбросов углекислого газа.

    Страны, которые юридически связаны ограничениями, установленными и согласованными с Протоколом, называются рынками для соблюдения договорных обязательств. В рынках соблюдения ответственность по сокращению карбоновых выбросов лежит на отдельных отраслях и компаниях, контролирующих выбросы углерода в атмосферу. Проиллюстрируем это на примере:

    Компании А и Компании Б выделено  100 квот на выбросы углерода, который разрешает им выпустить 100 тонн углекислого газа. Компания А инвестирует в экологически безопасное оборудование и устанавливает обновления, чтобы убедиться, что она выбрасывает только 90 тонн. Компания Б не использует ни один из вариантов, поскольку не может себе позволить ремонт оборудования. Она выбрасывает 110 тонн углеводорода, что на 10 тонн больше разрешённого лимита. Теперь, в соответствие с Протоколом и правилами по выбросам углекислого газа, Компания Б может приобрести квоты на выбросы (в денежной форме) у Компании А. И это, в свою очередь, помогает Компании А компенсировать часть расходов на модернизацию оборудования.

     Углеводородные квоты, таким образом, создали собственный рынок, давая денежную стоимость цене загрязнения воздуха. Существует значительное количество национальных и региональных рынков, которые в данный момент развиваются.

    В дополнение к вышеуказанному примеру, отдельные лица, группы и организации могут также торговать углеродными квотами. Рынки, которые обслуживают добропорядочных граждан и организации, которые ответственно относятся к выбросам, могут торговать в пределах добровольных углеродных рынков (т.е. рынков, помимо рынков соблюдения, которые юридически не обязаны придерживаться установленного лимита на эмиссии..

    Все упомянутые углеродные кредитные операции вызвали тревогу в мировом сообществе. Экономисты утверждают, что если углеродный рынок оставить действовать свободно, без регулирования, то не будет никакого существенного снижения выбросов углекислого газа. Они считают, что нет адекватных стимулов для компаний по сокращению выбросов в соответствии с принципом торговли углеродом. Это трудная задача внедрить и регулировать добровольный углеродный рынок. Отсутствие согласованных правил, отсутствие единого органа для мониторинга и контроля углеродной торговли может стать благом для банкиров и трейдеров, но нанести гораздо более разрушительный эффект мировому сообществу.

    Очевидно, что в отличие от традиционных товаров, углеродные квоты не слишком понятны для покупателей и даже некоторых продавцов. Этот недостаток знаний и понимания делает торговлю квотами на выброс углерода очень уязвимой для мошенничества. Эта форма торговли еще находится в стадии становления, и очевидно, что по мере развития, появятся свои сложности. Торговый рынок углерода может быть введен в заблуждение путем манипуляций о получении большего количества углеродных кредитов от некоторых проектов, чем было получено на самом деле. Было несколько случаев, когда квоты продавались людям с хорошими намерениями, но в сущности они никогда не существовали, или принадлежали другим лицам (не тем, кто позиционировал себя как продавец). Сложность углеродных рынков была использована в обманных целях компаниями, которые делали ложные заявления о финансовых и экологических выгодах от инвестиций в торговлю квотами на выбросы, делая такие инвестиции привлекательными. Австралийская компания провела в 2009 году телемаркетинговую кампанию, утверждая, что углеродные кредиты – это будущее и предлагая высокие доходы по этим инвестициям. Компания получила иск от обманутых инвесторов на 3,2 миллиона долларов  . [1]

     Известно, что слабые нормативные акты в этом секторе торговли были использованы для осуществления отмывания денег, налогового мошенничества, мошенничества с ценными бумагами. В одном из подобных судебных разбирательств в Королевском Суде Лондона проходили трое обвиняемых, которые создали фиктивные компании, якобы импортировавшие углеродные кредиты в Великобританию. Они были признаны виновными в обмане правительства на 39 миллионов фунтов НДС (налога на добавленную стоимость) всего за 69 дней торговли. Украденный НДС был переведен на счета в ОАЭ для отмывания и легализации .[2]

    Сложный характер кредитного рынка углеводорода делает его уязвимым для манипуляций. Крайне важно, чтобы правовое регулирование было очень жестким, когда дело касается регулирования и торговли в этой сфере. Данный рынок должен стать более многогранным в ближайшем будущем, и существует необходимость в строгой внутренней и международной правовой экспертизе для защиты компаний и частных лиц, которые стремятся быть экономически сознательными. Сегодня СО2 продается, но что мы можем ожидать в будущем?

    ]]>
    Mon, 05 May 2014 12:00:00 GMT
    <![CDATA[Агентские соглашения ОАЭ]]> Агентские соглашения

    «Если вы строите каждую сделку и отношения в бизнесе и жизни, руководствуясь принципами взаимной выгоды, справедливости и правды, то прибыль не заставит себя ждать».

    Это высказывание нужно принять как мантру при подписании агентского соглашения. Если все агенты и заказчики будут рассматривать взаимную выгоду как высочайший стимул, каждая сторона будет в выигрыше..

    Агентское соглашение является юридическим договором, который создает доверительные отношения между двумя сторонами, в результате чего первая сторона (Заказчик) соглашается, что действия второй стороны (Агента) обязывают Заказчика к последующим соглашениям, заключенным Агентом, как если бы Заказчик заключил их сам.  Федеральный закон ОАЭ № 5 от 1985 года (Гражданский Кодекс) и в особенности статья 149 Гражданского Кодекса определяют положения законодательства в отношении агентских соглашений. Статья 149 устанавливает, что контракт может быть составлен заказчиком, а также агентом, если законом не предусмотрено иное..'

    Иностранные партнеры, которые хотят вести бизнес в ОАЭ с минимальными инвестициями, часто обращаются к коммерческим агентам для продажи своих товаров. Закон, регулирующий агентские соглашения, это Федеральный Закон номер 18 от 1981 года, который часто называют Агентское Право. Закон №13 от 2006 года во многом изменил законодательство 1981 года, но был отменен в 2010 году, и Закон №18 1981 года восстановлен в силе. Можно утверждать, что этот закон носит общий и несколько абстрактный характер, и, хотя он охватывает все формы агентских соглашений,  этот закон несколько расплывчат и неоднозначен по форме. Коммерческое агентство определяется как «представление заказчика агентом для распространения, продажи, демонстрации или обеспечения товарами или услугами в обмен на комиссию или часть прибыли». Агентское право является довольно консервативным и в некоторых случаях предвзятым, поэтому, в случае если иностранная компания хочет начать или расширить уже существующий бизнес на рынке ОАЭ, обязательным условием является юридическая консультация перед тем, как принимать какие-либо конкретные обязательства в отношении договоренности с потенциальным агентом. Иностранный гражданин должен быть осведомлен о некоторых важных факторах перед тем, как вступать или прекращать агентское соглашение, и определенно мы здесь должны заметить, что как и большинство стран, ОАЭ оказывает поддержку своим гражданам. Федеральный закон №2 от 2010 г. был принят для того, чтобы внести изменения в существующий закон №18 от 1981г., и это служит наглядным примером поддержки прав коммерческих агентов. 

    ОТНОШЕНИЯ ЗАКАЗЧИК-АГЕНТ. ЗАКЛЮЧЕНИЕ И РАСТОРЖЕНИЕ КОНТРАКТА.

    Следует понимать, что только граждане ОАЭ или компании, принадлежащие гражданам ОАЭ, могут выступать как торговые агенты в Объединенных Арабских Эмиратах. Это абсолютное положение Агентского Права ОАЭ.  Агентское соглашение эксклюзивно действует на территории ОАЭ, это может быть один эмират, несколько эмиратов, или территория ОАЭ в целом. Торговый агент должен быть зарегистрирован в Регистре Коммерческих Предприятий, который регулируется Министерством Экономики соответствующего эмирата. Если агентское соглашение зарегистрировано, агент имеет юридическую защиту и привилегии, например, требовать возмещения убытков от имени Заказчика..

    Разрыв агентского соглашения может быть чрезвычайно обременительным, и как только соглашение заключено и зарегистрировано в Министерстве Экономики, прекратить его действие по инициативе Заказчика чрезвычайно трудно. В большинстве случаев, когда Заказчик пытается прервать отношения с агентом или отказаться от агентского соглашения, это выливается в выплату значительной компенсации местному агенту. Закон дает агентам право на компенсацию в случае прерывания контракта. Компенсация, установленная судом, обычно бывает довольно значительная и кроме того, Заказчик принуждается ко всем выплатам по контракту. При расчете компенсации судом во внимание  принимаются следующие факторы: продолжительность агентского договора, усилия агента по продвижению товаров заказчика и чистая прибыль, полученная агентом. По этой причине закон может быть выгодным для заказчика и обеспечивать определенную степень равенства и справедливости. Если агент выполняет свои обязательства надлежащим образом и оперативно, то для Заказчика нет необходимости разрывать контракт.

    Закон, регулирующий агентские соглашения, претерпел ряд изменений для решения конкретных проблем и предотвращения периодического раскачивания маятника между правами Заказчика и Агента. До изменений, внесенных в закон в 2006 году, прекращение агентского договора или отказ в продлении его срока действия могли быть успешно осуществлены только при наличии «уважительной причины», а что будет являться таковой, оставалось на рассмотрение Комитета Коммерческих Агентств при Министерстве Экономики. После 2006 года закон были внесены изменения и некоторые послабления, что, несомненно, сделало более привлекательным для иностранных заказчиков перспективу проникновения на рынок ОАЭ, не чувствуя себя незащищенными. Новое правило дает возможность Заказчику прекратить действие агентского соглашения по истечению срока, указанного в контракте. Кроме того, закон дал право любой из сторон договора требовать компенсации в случае нарушения или невыполнения обязательств.

    Для того, чтобы открыть бизнес на территории ОАЭ, привлечение местного агента остается привлекательным способом выйти на рынок, однако делом первостепенной важности является внимательное отношение к потенциальным торговым агентам и помощь адвоката для изучения, проверки и подготовки коммерческого договора с агентом. Привлечение адвоката также гарантирует, что положения «Агентского права» будут соблюдены.'

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    Wed, 12 Mar 2014 12:00:00 GMT