СТА - ведущая юридическая компания в Дубае с офисами по всему мируhttps://www.stalawfirm.com/ru.htmlSTA Law Firm - Блоги - UAE Competition LawruCopyright 2024 STA Law Firm All Rights Reserved<![CDATA[ UAE Introduces Private Teacher Work Permit to Regulate and Foster Learning]]> UAE Introduces Private Teacher Work Permit to Regulate and Foster Learning

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

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

Regulating the Sector

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

Application Process:

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

Key Features of the Private Tutor License

Eligibility and Application

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

Validity and Cost

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

Penalties

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

Geographical Flexibility

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

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

Processing Time

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

Application Denial

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

Required Documents for registration

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

Conclusion

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

 

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Sat, 03 Feb 2024 00:00:00 GMT
<![CDATA[Competition Law in UAE]]> Competition Law in UAE

If a certain organization succeeds in overtaking the market by outshining its competitors, then the competitors face abuse of a dominant position which leads to a competitive market being governed by erroneous marketing mechanisms. Such erroneous market mechanisms would also include within its ambit where two or three dominant distributors or sellers of a particular product, for instance, toothpaste, decide together to sell all such kinds of toothpaste available in the market at a high price which leaves the consumers with no option but to purchase an essential product like toothpaste at the hands of unfairness. The competition law in the United Arab Emirates (UAE), targets to promote and at the same time, protect competition and anti-monopoly practices by enhancing efficiency and consumer interest. Sustainable development is aimed to be achieved by stimulating a healthy and productive environment amongst organizations by regulating fair, competitive practices in the jurisdiction. Federal law Number 4 of 2012 on the Regulation of Competition (Competition law) governs competition in UAE and aims at harboring fair and correct market mechanisms in consonance with the principle of economic freedom. Exclusion and prohibition of restrictive agreements are adhered to garner the prevention of competition. Acts and behaviors leading to a dominant position and controlling of economic concentration operations are prohibited along with any other acts endangering or limiting competition. An economic concentration is an act that would result in an organization or a group of organizations to have direct or indirect control over an organization or a group of organizations by the execution of whole or partial transfer in the title of property, rights, shares or stocks from one organization to another. Any organization being enabled to control either individually or collectively with any other organization that affects the relevant market would be in the hindrance of the Competition Law. Any legal or natural person practicing an economic activity or any person in an association, regardless of its legal form, is entitled to do so and will be termed as an organization under this Law. A relevant market would entail any commodity or service or a combination of commodities or services which based on their characteristics, price and methods of use may be substituted with any other goods or services or other alternatives chosen in order to meet a specific requirement of consumers in a certain geographical area. Competition can be defined as an organization performing economic activities in a relevant market in accordance with the market mechanisms without such market mechanisms having an adverse impact or limiting development.

Scope and Jurisdiction

This Law shall apply to all economic activities that are carried out by organizations in the UAE. It shall also extend to the abuse of intellectual property rights inside and outside of the jurisdiction of UAE. Any such economic practices that are practiced beyond the territory of UAE, however, affect competition in the UAE, shall also be administered under this Law. The provisions shall not apply to any practice, agreement or business that is related to any service or commodity which is governed under the regulation of competition rules granted by another law or regulation to sectoral organizational bodies. However, if such sectoral organizational bodies apply to the Ministry of Economy in UAE in writing to be included and provided that the Ministry approves of such application, then the provisions of this Law shall apply to such sectoral organizational bodies. In the absence of such application, the exclusions shall continue to include the telecommunications sector; financial sector; oil & gas sector; cultural activities (including audio, visual and print); production and distribution of pharmaceutical products; mail and courier services; activities in relation to production, distribution and transmission of electricity and water; activities in relation to sewage, garbage disposal, sanitation and other similar activities along with environmental services in support of such activities and land, sea & air transport sectors (transport by rail and related services included). The Council of Ministers shall be authorized to make any addition or deletion of these sectors, activities or works laid down in such exclusions. Small and medium-sized organizations in accordance with prescribed controls by the Council of Ministers shall also be excluded. Any acts undertaken by the Federal Government or one of the UAE governments or any acts carried out by organizations based on decisions, authorizations or under supervision of the government shall be excluded from the ambit of this Law.

Competition Regulation Committee

A committee by the name of Competition Regulation Committee shall be formed under the Competition Law which will be chaired by the undersecretary of the Ministry of Economy. The Council of Ministers shall hold power to oversee the formation of such a committee, along with the regulation of its work system, the term of membership and remuneration of the members of the committee. This Committee shall be responsible for mandating policy for the protection of competition in UAE. It shall also consider issues related to the implementation of provisions of the Competition Law and raise any recommendations as required to the Ministry. Any legislation or procedure as deemed necessary for the protection of competition shall be presented to the Minister of Economy and recommendations for the exclusion of restrictive agreements or practices relevant to the dominant position can also be made by the committee. Any submission of applications to the committee for reconsideration of decisions made by the Minister shall be made within ten days from the date of notification of such decision. The committee shall also have the duty to prepare an annual report on the activities of the committee which shall be presented to the Minister along with the handling of any other related matters for the security of competition in the jurisdiction of UAE.

Anti-Competition Practices

The Law prohibits organizations holding a dominant position from the imposition of prices on retailers or distributors and prohibits from falsely or deliberating cutting prices to alter the mechanisms in the market to their own advantage either directly or indirectly. Restrictive agreements are proscribed from restricting or preventing competition in the relevant market. Any agreements that cause the freezing or limiting of production, distribution or marketing are prohibited. A restrictive agreement would also include any agreement that restricts the freedom of supply of goods and services in the relevant market. Anti-competition practices can be broadly divided into two parts, including restrictive agreements and abuse of a dominant position, and they have been outlined below:

Restrictive Agreements

Any agreement that has as its subject the abuse of competition shall be delimited. The Competition Law forbids restrictive agreements that cause retractions on competition in the relevant market. These regulations have been imposed and penalized as to prevent causing waves in the competition levels in the relevant market. Such restrictive agreements would include the following:

  • Agreements that aim to fix directly or indirectly, the purchase/sale prices of goods or services by causing a reduction or increase or fixation of prices which affects competition.
  • Any agreement determining terms and conditions of sale, purchase or performance of services or any similar transaction.
  • An agreement indulging in collusion of bids or proposals in tenders, practices and any other supply offers.
  • The limiting/freezing of production, distribution or marketing of any other investment aspects.
  • Any conspiracy piloted for the prevention of purchase from a particular organization that ends up limiting sale or supply to any other particular organization shall be an agreement conducted to abuse competition.
  • An agreement causing the obstruction of the ability of an organization to carry out its business would be prohibited.
  • A sudden oversupply that leads to the circulation of goods and services at fake prices, restriction of freedom of supply of goods and services to relevant market including hiding or unlawfully storing goods and services would all be included under restrictive agreements.
  • Any agreement aimed at market sharing, allocation of clients with respect to geographical areas, seasons, periods of time, customer quality, distribution centers affecting competition shall be restricted.
  • Any obstruction of entry of an organization into the market or causing a deliberate exclusion of any organization from the market shall not be permitted.
  • Abuse of Dominant Position

    Any organization that is any dominant position in the relevant market or in any other influential or substantial part will not be sanctioned to carry out any activity that leads to the abuse of such a dominant position that prevents, restricts or prejudices competition. Such organization shall not be permitted to perform objectives that directly or indirectly impose prices or conditions for resale of any goods or services; sell goods or perform services deliberately below the cost price in order to obstruct entry of competitive organizations to the relevant marker; exposing such organizations to losses making it harder for competitive businesses to continue their business; compelling any customer to not deal with a competitive organization; unjustified imposition of a false price by abstaining selling or purchasing of goods or services; causing unjustified discrimination of customers in identical contracts in terms of process of goods and services; distributing false information knowingly about the products or process of any other organization; forming conclusions of sale or purchase contract or agreement for goods and services that lies contingent on acceptance of obligations for dealing with other goods or services that are unrelated to subject of original dealing; causing an increase or decrease in the quantity of a product which creates a forced deficit or oversupply of goods or services.

    Penalties

    Any organization that causes a violation of either the provisions prohibiting restrictive agreements and abuse of a dominant position shall be subject to a penalty of a fine ranging from AED 500,000 to AED 5,000,000. Other penalties include that any organization in violation of any other provision of the Law shall be fined of no less than AED 10,000 to no more than AED 100,000. In the event of a recurrence, the penalties shall be aggravated. It is also possible for a concerned party to file for a complaint with the Ministry that concerns any violation of the provisions of the Law in consonance with the executive regulations of this Law. A written request to the Minister can also call upon for a criminal case against any violations or negligence of duties being caused by the Ministry. Any competent court is entitled and authorized to render a decision for the suspension or prevention of any act in relation to competition cases that have been considered on a summary basis until the final declaration of the decision being rendered.

     

     

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    Wed, 03 Jun 2020 10:15:00 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[Base Erosion and Profit Sharing (BEPS)- Tax Evasion of Multinational Corporations]]> BASE EROSION AND PROFIT SHARING (BEPS)- TAX EVASION OF MULTINATIONAL CORPORATIONS

    OLD WINE IN A NEW BOTTLE

    Before 1961, there was a minimal focus on national tax laws upon the multinational corporation's tax and digital economy because during that time no country taxed the foreign source. During that time the nations were under the illusion that they lacked both the origin and residence of the foreign corporation. Lack of taxation imposed on multinational corporation has left the path opened for the multinational corporation to evade the global corporate tax. Furthermore, in 2008, the vast recession resulted in inequalities between the overseas nations and inter-city in the developed and developing countries.  Politically influenced by the US and the UK were peeking into massive profits of multinational organizations such as Google, Apple, and Starbucks paying less than the fair share of taxes. For resolution of the global taxation chaos, the league of nations in the 1920s designed the "Draft Model Treaty on Double Taxation and Tax Evasion[i]" is as a reference by the United Nations and the Organisation for Economic Co-operation and Development (the OECD) in establishing model tax treaties. Furthermore, through model tax treaties, the government and the Multinational Enterprises (the MNE) were focusing on eradication of double taxation rather than interpreting the danger of double non-taxation.  In response to the abovementioned scenario, in 2013 finance ministers of the world formed a group known as G20 and the OECD initiated the extension of the reevaluation of the global tax system known as "Base Erosion and Profit Sharing" (the BEPS). The OECD tax experts developed a set of principles for BEPS projects. BEPS project states that "economic activities generating the profits and creation of value, must ensure taxation on profits[ii]." BEPS project is formed to consider the issue of double non-taxation, and a stronger imposition of rules on Controlled Foreign Companies ( theCFC) which would allow taxing upon offshore subsidiaries[iii].  But the primary problem of BEPS is that it is not yet well redefined and structured. The aim of OECD in developing BEPS is to tax multinational corporations overseas to generate revenue for their citizens and to close the international tax loophole.

    A COMPARATIVE STUDY BETWEEN THE UNITED STATES AND THE UNITED KINGDOM

    The BEPS project was adopted by the Obama Administration in the United States (the U.S) in 2013. BEPS project was strongly endorsed by Treasury Secretary Jacob J who stated that "address the persistent issue of stateless income, which undermines confidence in our tax system[iv]." In 2016 budget, former president Barack Obama had imposed a new tax on corporate earnings held abroad which had resulted in additional revenue of $238 billion[v]. These political and economic factors have accelerated BEPS project in the US which have ultimately strengthened the US taxation which has to increase the inflow of the corporate tax revenue. Until now the US companies were paying lower tax rates by transferring their intellectual property to low tax countries like Luxembourg and United Kingdoms.  In 1980s cost-sharing concept was developed by the Internal Revenue Service (the IRS) Regulations which became more significant due to increase in the importance of intellectual property. The US MNE's like Apple Inc.took advantage of this cost-sharing concept and shared the cost of development of its project overseas such as in Ireland. For example, Apple Irelandcontributed 80% of the cost of developing the Iphone6 and the Apple Inc. would receive 80% of the profit earned from the sale of Iphon6 in Ireland.  Another gamble made by Apple Ireland was that it had issued a license to right to use Apple's brand and intellectual property to Apple Inc. that affiliates to other countries. Those affiliated with Apple Inc. brand in other countries were liable to pay massive royalties to Apple Ireland to shift its sales profit to Ireland. In 1997 Clinton administration adopted the rule called 'check the box'under which Apple Ireland treated all its MNE as a separate entity and the profit earned through it as its own sales income. In 2015 Obama administration repealed the concept of 'check the box,' and Apple Ireland revealed that it paid the tax rate of 12.5% rather than US tax rate of 35%, on recognition by an Irish company in the Senate hearing.

    Furthermore, Google saved billions in taxes worldwide. For example, in Australia Google just paid AUD$ 74,176 in 2013 despite making estimated revenue of AUD 1billion.  Google reduced its overseas tax rate by 5%. Apple Inc. uses the same concept where it paid a tax bill of merely AUD$ 40 million despite generating estimated revenue of AUD$6 billion.  In the United Kingdom, Starbucks a coffee shop just spent £8.5 million in tax between 1998 and 2008 despite generating revenue of £3 billion[vi].

    A Similar case of Caterpillar Inc. vs. Williamsreveals another scam where US government encourages international corporate tax avoidance. A brief outline of the Caterpillar Inc. is that it is the US MNE which is in the business of manufacturing of industrial equipment and engines. Caterpillar Inc. has its subsidiary company in Switzerland named Caterpillar SARL (the CSARL) as a principal in sales of replacement parts. US Senate hearing reveals that Caterpillar Inc. paid $55 million to Price Water-house Cooper (the PWC) for design and implementation of tax structure in 2012. Furthermore, after execution of tax structure designed by PWC, Caterpillar Inc. continued its business of sales of replacement parts in Switzerland and return it received service fee which was equal to its cost plus 5% from CSARL. CSARL also paid 5-6% royalties to Caterpillar Inc. outside the US. In the US Senate hearing, it reveals that the US government is promoting its MNE's in the avoidance of not only the foreign tax but also the US corporate tax. The issue of Caterpillar Inc. was highlighted not because of tax audit but because of the civil lawsuit between the company, and it's internal tax manager who alleged that Caterpillar Inc. reacted against him since he had expressed his concern about the lack of economic substance in the company's tax structure. This incident exposed the company's international tax avoidance.

    Additionally, in the case of Futuris Corporation Ltd. Vs. Federal Commissioner of Taxation(the FCT) where the taxpayer wanted to float some profit of the business, so to do that the taxpayer transferred some assets to other group companies through a tie-up with its shareholdings and capitalized some existing debts[vii]. The Commissioner argued the creation of tax benefits which were rejected by the Full Federal Court.

    But now as per the guidelines of the BEPS suggest that payment of corporate tax to the countries where there is a creation of the value such as in the case of the US, it is California which is the IT hub. Furthermore, this shows that US economy is driven by intangible assets rather than tangible assets. In the US, corporate income tax was estimated to be 1.9% of GDP in 2015 as per the reports of Office of Management and Budget (the OMB). As seen in the OMB report it can be interpreted that the corporate taxes in the US are higher than marginal corporate income tax rate in the UK. For example, as per the survey conducted by the KPMG, United States pay 35% federal marginal tax rate on their profits along with its state and local taxes taken into account comes about a total marginal rate of 40%. Whereas, in comparison to the UK the marginal corporate income tax is 20%. If it is compared to the overall unit of Europe, then the average is 20% marginal corporate income tax rate. These BEPS rules are not only increasing the corporate tax payments globally but causing a vast corporate revenue loss to the United States since the US pays 15% marginal corporate income tax more than the other countries. If the situation in the US remains the same, then there will be a brain drain in the US since most of the skilled and creative workers will migrate to other countries. Many academic scholars debate the fact that most of the nations are implementing BEPS project without government approval and uses OECD international tax guidelines as the basis for their procedure. Therefore, BEPS project has given strict instructions to the national tax authorities to contemplate the functioning of multinationals overseas carefully.

    Intellectual Property Tax Rate

    The erosion of another significant issue in the United States is that due to tax pressure on the US companies, other European countries are offering lower tax rate for profits gained from intellectual property such as patents. For example, the United Kingdom provides 10% rate on intellectual property compared to 20% overall corporate tax rate. This concept of the lower tax rate on intellectual property is trending as patent boxes. Chief Executive Andrew Witty of GlaxoSmithKline has recently quoted upon patent boxes saying "Since the patent box, we have invested in upgrading 15 or 16 of our sites in the UK. It has made Britain the go-to place for our industry"[viii]. So, to benefit 10% tax rate on the patent boxes most of the research and development workers in the US multinationals are migrating to the UK. Due to the enormous difference in the tax rates between the United States and Europe, most of the multinationals are aggressively using these tax strategies. Therefore, to mild the situation BEPS are eliminating these aggressive tax strategies.[ix] On the other hand, BEPS rules are encouraging the US companies to shift these high paying jobs such as research scientist and software developers to Europe to incur lower tax rates.

    It was proposed by trade partners in the US to modify the US Controlled Foreign Company (the CFC) which it states "base company sales income" which refers to foreign income tax.[x] They suggest that taxation on US MNE's would be as per the sales income acquired from its production. But the US government tax authorities have strictly formed the CFC rules that it would be applied upon the incorporation of the company and not upon its production income.  Taxation imposed on corporation allows qualifying many entities of MNE taxable in the US. It has been debated by many US government officials and tax authorities that more transparency is required in the BEPS project to make it easier for the tax authorities to investigate in regards to international tax avoidance cases.

    The adoption of the BEPS project in the UK in 2014, the former Exchequer Secretary expressed its UK's support for OECD's BEPS action plan to Treasury David Gauke. There is a debate on the ongoing issue of Brexit in the UK, whether it will affect the implementation of BEPS project in the UK for international tax avoidance or not. Anticipation by KPMG states that Brexit will not interrupt UK's implementation of BEPS action plan. 

    CONCLUSION

    This article concludes that from the above findings the study shows that most of the multinational corporations reallocate their profits globally to lower corporate tax. Notably, in the United States after the implementation of the BEPS project by Obama administration most of the prominent multinational companies are shifting their profits in the United Kingdom where the marginal corporate income tax is 20% which is 15% less than the US corporate income tax. Moving of prominent tech companies to the UK has incurred a massive loss of corporate revenue for the United States. BEPS rules have turn out to be a disadvantage for the US MNE's, due to competitive taxation system in the US most of its skilled and creative workers are shifting to the Europe where there is 10% tax rate on the patent. In the current scenario, it is debated by the US government officials and tax authorities to modify BEPS rules to make it more transparent so that it becomes more comfortable for the tax authorities to interpret it while investigating in regards to international tax avoidance cases.  On the contrary, there is a little success rate of BEPS in the UK since there is lower corporate income tax on multinational corporations and it will not be interrupted even after Brexit. The objectives of the BEPS projects are still vague and more defined rules are required to be structured by OECD to have a global impact of taxation on multinational firms.

    [i]Reuven S. Avi-Yonah; Haiyan Xu, Evaluating BEPS, 10

    Erasmus L. Rev. 3 (2017)

    [ii]Johann Muller, BEPS Case Study, 24 Int'l Tax Rev. 29

    (2013)

    [iii]Johann Muller, BEPS Case Study, 24 Int'l Tax Rev. 29

    (2013)

    [iv]Reuven S. Avi-Yonah; Haiyan Xu, Evaluating BEPS, 10

    Erasmus L. Rev. 3 (2017)

    [v]Reuven S. Avi-Yonah; Haiyan Xu, Evaluating BEPS, 10

    Erasmus L. Rev. 3 (2017)

    [vi]Mandel, Michael, The BEPS Effect: New International Tax Rules Could Kill US Jobs (June 2015). Available at SSRN: https://ssrn.com/abstract=2872250 or http://dx.doi.org/10.2139/ssrn.2872250

    [vii]Mandel, Michael, The BEPS Effect: New International Tax Rules Could Kill US Jobs (June 2015). Available at SSRN: https://ssrn.com/abstract=2872250 or http://dx.doi.org/10.2139/ssrn.2872250

     

    [viii]Discussion Paper No. 13-078 Profit Shifting and "Aggressive" Tax Planning by Multinational Firms: Issues and Options for Reform Clemens Fuest, Christoph Spengel, Katharina Finke, Jost H. Heckemeyer, and Hannah Nusser.

     

    [ix]Discussion Paper No. 13-078 Profit Shifting and "Aggressive" Tax Planning by Multinational Firms: Issues and Options for Reform Clemens Fuest, Christoph Spengel, Katharina Finke, Jost H. Heckemeyer, and Hannah Nusser.

     

    [x]Johann Muller, BEPS Case Study, 24 Int'l Tax Rev. 29

    (2013)

     

     

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    Mon, 14 May 2018 11:24:33 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.

     

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    Mon, 14 May 2018 10:43:16 GMT
    <![CDATA[Trademark Scent]]> THE REGISTRATION OF SCENT TRADEMARK AND ITS ISSUES.

    Part II

    "Perfume is the most intense form of memory."              

    - Jean Paul Gaultier.

    In the previous Article concerning Registration of Smell, fragrance, olfactory marks and Aroma Trademarks – Global overview, we discussed a perspective of major countries in the world in regards to smell marks. However, the other aspects of the smell marks are discussed in the following article.

    Will the aroma of fresh mint or lavender in a particular kind of tea, would be more attractive to you because of its smell? Will the smell of the product lean you towards buying the product even more? Well, these are subtle ways where manufactures familiarize us with their products.The question here arises, as to how far can a trademark be stretched to protect a fragrance of a product?

    Can a scent be claimed?

    In today's marketplace, most of the companies are constantly attempting to produce the cream of the crop products and services. The services and products are just not limited to Its visual effects but industries go to create a greater strength and product loyalty be engaging other senses of the human body. The sheer number of competitors in any particular industry is making it more difficult than ever for companies to capture and preserve substantial market share. While eye-catching symbols and entertaining statement are still the top of the game in the types of trademarks. Nevertheless, non-conventional marks like color, scent,and taste are no longer a scarcity.

    However, Scent marks are more challenging than visual trademarks as they are defined subjective and are therefore open to interpretation. The difficulties that arise from human sensitivities whether the scent mark functions as a trademark. The smell makes the strongest impact on our mind and remains in our memory for a longer period of time. In relation to a successful registration,scent marks are considered as the most difficult marks to be represented graphically and objectively to the relevant authority. We all choose and distinguish between products based on their smell, even more, fragrance can tell us a lot about the product and sometimes you can even recognize some of the products based on its smell.

    In this consumerist oriented society, trademarks are a crucial part of this journey, we might as well certify that the smell of the product consumed is strong and durable enough to last in our memory and otherwise. Corporations are seeking to list their smell as away to differentiate their products from a sea of competitors. Recently, there has been a lot of attention given to the scent tramcar. Laws and regulation need to keep pace and follow up with the huge development that is happening in the field of science and technology to provide it with the required protection. It is known that the Intellectual property laws aim to do that, provide the technological innovations with protection. The question that arises, is smell covered under the protection of Intellectual property laws?

    In 1990, the United States patent and Trademark Office Trademark Trial and Appeal Board ( theTTAB) decided in Le Clarke and for the first time to order the trademark office(PTO), to issue a fragrance trademark registration, they predicted at that time that people would  use the Clarke decision as basis to claim fragrance trademark registration in the future, but the number of people who applied for Scent marks registration was surprisingly less, although it was expected to have a greater demand considering the number of products that use scents in a primary way.

    In recent years, we have already seen in part 1 of this article that was published previously about this matter is that it is subject to change depending on each legislation in different countries and that the UAE Law covers protection of sound and motion pictures under the UAE's intellectual property law. Australia and Canada's legislation currently include the scents under its protection. Other jurisdictions include New Zealand, Korea, Peru, Columbia,and France. The amendments published in the Royal declaration on April 29,2016, to Thailand's trademark Law included the addition of sound marks under Section (4)of the definition of themark but neglected the importance of the scents giving that there were conflicting opinions around it.

    Don't take away my fragrance…

    The registration of such fragrance in the legislation that acknowledges the trademark and copyright protection for these fragrances can raise complications generally in deciding the elements that need to be taken in mind to know if it's possible or not, some of these problems include but are not limited to:

    Generic Fragrance

    There are some smells that are regarded as a generic smell. For example, Pine oil is known to be a disinfectant and is included in many cleaning products. Therefore, the smell of pine oil comes generally with this product which means that it is nearly impossible to use the pine oil to differentiate between diverse cleaning products.

    Similarly, the scent of lemon is used in dishwashing cleaning liquids because of its anti-bacterial properties. It becomes a custom among people to consume lemon scented dishwasher cleaning liquids, and because it is a generic smell, it can't be registered as a trademark by an individual.

    Fragrance Functionality

     In the recent decision of TTAB, it was discussed that "a mark is deemed functional if it is a feature dictated solely by function", here it specifies that only the possession of a function does not make a mark necessarily functional.

    In the famousMorton-Norwich case, "the court considered the functionality of certain spray bottle design. It pointed out that the requirement of non-functionality is not mandated by statute, but is derived entirely from court concluded later that "the claimed spray bottle mark was not functional for, among other things, it was not shown to be the best design available, or one of a few superior designs, and the perceived effect upon competition of according trademark status to the design would be minimal at best". The court then turned I's heads to the issue of distinctiveness as it acknowledged that for the applicant's mark to be considered it must also appear to be originally distinctive, or at least show any sight of distinctiveness. Later the court found that the separate distinctiveness issue had not been considered by the TTAB, ergo, the case was again remanded for some good reasons.

    Fragrance Distinctiveness

    As observed, it appears that the scent trademark issue mainly focuses on providing rational "Competition", a point of view that gives the competitors a fair opportunity to use. For example, the same geographical designations for their product, or offer goods or services that share the same surname or apply the same descriptive terminology to their articles. Designating goods or services emanating from a particular source, that the mark becomes distinctive and the source is permitted to register the term as amark. In this case, a proof of distinctiveness is required. It may well be that some perfumes have a commanding and dominant natural smell that others should not be directly precluded from using displays the distinctiveness and excellence before the federal registration would take place. In some cases, such distinctiveness may be impossible to establish. For example, the smell of jasmine is popular in perfumes. because of that, any perfumes express a jasmine smell might well view as generic, which mostly leads to it being non-registrable.

    Another example can be applied to the natural smell of campfire, if inserted in a new men's cologne can it be registerable without proof of distinctiveness? On the one hand, if it is common, every day and natural smell, it should not be registrable without proof of distinctiveness.  On the smell of men's cologne.

    In a recent case Hasbro, Inc. filed an application to trademark the scent of PLAY-DOH under the Trademark Law.  ascent cannot be trademarked unless it is intrinsicallydistinguishing. The company described the smell as "a unique scent formed through the combination of a sweet, slightly musky, vanilla-like fragrance, with slight overtones of cherry, and the natural smell of a salted, wheat-based dough." While Hasbro did claim it as a distinctive smell, the registration of scent mark is still not widely recognized.

    Can ascent be graphically represented?

    Registering a sound mark require the sound then be graphically represented in the form of description of the sound and an electronic recording of the sound, the same concept applies to smells it should be graphically representable.

    While some people think smell can't graphically represent, studies show it is possible because each compound has its own chemical architecture, exactly as it is possible to represent a sound through time domain waveform, it is possible to represent the smell graphically. It will also react differently if it was subject to bombardment by astream of electrons as it will fragment in a particular pattern and leave behind a unique fingerprint of the compound. The scent is a chemical compound in its gaseous phase that our nostrils develop to detect, and the scientific field also developed many analytical techniques to detect and analyze the chemical compounds of the smell.

    If a picture is worth a thousand word than the ability to represent the scent in a graphical way is worth a lot more for the trademark world!

    Conclusion

    In conclusion, registering a fragrance depends on various elements and tests that are used to decide in comparison with the other items as well, meaning fragranceis to be evaluated for registration just like any other mark. As these examplesillustrate and publicizing advantages to registering scent marks, and the efforts are meaningful if it results in an exclusive source that may be more valuable and profoundly connects with consumers than a typical visual trademark.

     

    ]]>
    Tue, 24 Apr 2018 12:15:07 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[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[Due diligence в горнодобывающей промышленности ]]>The 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[Limited Liability Companies: ]]>the implications of the new Commercial Companies Law   Although the primary objective of companies law is to safeguard interests of shareholders, modern/current day investment climate dictates that the legislation dealing with companies should i) serve the interests of business at large; ii) provide for simple and easy regulatory and compliance procedures; iii) keep pace with complexities of traditional and modern commercial dealings; iv) address issues governing insolvency, bankruptcy, securities and other key elements; and v) provide continuity, certainty and stability to business community.   Dubai has been at the forefront of adapting to the economic demands of the United Arab Emirates and has continually shaped the laws accordingly. The Commercial Companies Law no. 2 of 2015(the CCL) was published in the official gazette in the March 2015 edition and is to be implemented from July 1, 2015.   The main objective of the CCL is to keep pace with the tremendous development in trade relations, economic openness and global variables as Article 2 of the law aims to contribute to the development of the business environment. The law endeavors to organize the capabilities and economic status of the companies in line with global variables particularly in relation to corporate governance rules, protection of rights of shareholders and partners to ensure an influx of foreign investment in the region and promote social responsibility. The remainder of the law outlines the implementation of the law and the achievement of these objectives. This first article of three part series discusses each of these key provisions with a particular focus on Limited Liability Companies- the effect and implication of the new law on both – existing as well as future entities and.   Scope & Exclusions   The scope of the application of the CCL applies to all commercial companies that are incorporated within the UAE, foreign companies including branch of foreign  companies and representative office(s). The new CCL sets out a clear explanation to its applicability and explicitly lists the kind of companies that are covered within its scope. While the old law did provide for the companies that were excluded from its scope the new law to some extent adds further explanation to the companies that qualify for these exemptions. For instance, the old law provided that all companies owned by federal or local governments or that are subsidiaries of government entities were exempt from the scope of the law.   The new law retains this provision but makes a sector wise sub-division as follows:    'in the event a company is involved in oil exploration, water desalination, transmission and distribution of energy as set out in their constituent documents, such companies should at least have 25% capital contribution by federal government, local government or any of its subsidiaries or organs in order to qualify for such exemption.' In addition to the aforesaid, following companies are also exempted from the scope of the CCL: a. companies in relation to which a Ministerial Order or   Cabinet Resolution has been passed are exempt. b. companies which are exempt by virtue of special Federal Laws; c. free zone companies. However, if such companies are permitted to conduct business activities outside such free zone; the new CCL will be applicable suo motu.    Definitions Interpretation of the law impinges on clearly defined terms that result in its ad rem applicability. The previous law only contained very few definitions of key words in the legislation. The new law includes extensive definitions and expressions for instance a definition of a careful person which is defined as "a person who has sufficient experience and commitment to duty in the performance of his work."   Careful man  The law defines careful man in Article 1 as a person who has the adequate experience and commitment required in his work.   Governance The law defines governance under Article 1 as a set of criteria and procedures which allow for the achievement of corporate governance in accordance with the international standards and practices, by determining the duties and responsibilities of the Directors and the executive management of the company, taking into account the protection of the rights of the shareholders and the concerned parties.   Strategic Partner   The law defines strategic partner in Article 1 as a partner whose contribution provides for technical, operational or marketing support to the company, for the good of the company   Price Construction The law defines construction price under Article 80 as a price assessed by one or more experts with technical and financial experience in the subject matter of the share, as nominated by the competent authority on demand by the applicant for preemption and at his cost.   Limited Liability Companies The law defines a company in Article 8 as a contract through which two or more people participate in an economic project with the aim to make a profit, by providing a certain share of money or expertise; and sharing any profits and losses that arise from this  project. Article 71 defines a limited liability company as a company that has not less than two partners and not more than fifty. However, the new law has provided for an exception which allows a UAE national or juridical person to incorporate a single person limited liability company. The liability of this company will be limited to the capital contribution.  This addition will present itself as a negation to the concept of a company.  The law has retained the requirement of 51% shareholding to be held by a local in a limited liability company, there have been significant and fundamental changes that have been incorporated pertaining to certain issues relating to establishing a limited liability company. The law has now requested The Council of Ministers to issue a decree to determine the minimum share capital of the company which was not a requirement under the old law. We must note that the scope and concept behind the draft Anti Fronting Law has been impressed upon in the new CCL under Article 10(iii) which classify any waivers of shareholding from the UAE national to other shareholders as a breach of the law and it will stand null and void.  The law has integrated this within its scope to extend the UAE nationals' shareholding rights. In the past, the Dubai Court of Cassation has ruled that by virtue of shareholders' agreeing to an assignment of the shareholding percentage, such assignment if being contradictory to the mandatory percentage of the shareholding under CCL; would deem the company illegal.  However, the court held that although the form of the company was illegal due to it being in contravention of CCL guidelines, the actual dealing between the partners were real and the foreign shareholder had the right to claim any loss or profit on account of above decision from the local partner- who had in fact agreed to sign such assignment willingly. Any claims against the company would be unjustified.  It would have been a welcome step if the amended law would have taken into consideration the above decision instead of allowing the local shareholder a statutory right to claim shares in a company that he is not involved in.    Share Transfer Article 80 of the CCL deals with the shareholders' rights relating to the transfer of shares. It also stipulates that if one of the partners desires to waive its share of people from non-partners in the company - with or without compensation - it shall notify the other partners through the company's director along with the details of the assignee or buyer and the conditions of the sale. The director must notify the partners as soon as he receives the notification.  Although the regulating provisions remain the same, a distinct hiatus from this has been that if one or more shareholder's wish to exercise their pre-emption rights, and the valuation of the shares is in dispute, the disposer shall appoint a technical expert or competent authority for the valuation of these shares as opposed to the previous requirement of employing the services of the company's auditor. The regulating provisions remain the same as per the above save that if a shareholder or a partner desires to dispose of his shares to people who are not shareholders and/or partners in the company-with or without compensation; the partner who is withdrawing out of the partnership has the right to choose a competent authority at the request of the applicant at his/her own expense. subject of share choose the competent authority at the request of the recovery by the applicant  at his own expense, and that if used right of redemption more than one partner split shares or share sold them by the share of each of them in the capital, and that if the elapsed period referred to without using One of the partners the right of redemption, the partner will be free to dispose of his share.     Share Pledge Since the shares of the company are considered to be its fortune, the law authorizes the disposal of the shares as the company deems fit and involving itself in actions such as assignment, mortgage as long as it is done in accordance with the Memorandum of Association. The pledge of the shares should be recorded in official documents, notarized and registered with the authorities. Such a pledge only becomes enforceable against third parties after the date of the pledge being registered. The shareholders have rights over the pledging of their percentage of shares and this right is unrestricted as long as it is compliant with the company's constitutive documents or against the provisions of the CCL.  The new Law allows the creation a pledge over the shares of a Limited Liability Company and also allows for the pledge to be registered in the Commercial Register. This will facilitate a company to avail better financing options such as mortgages. The old law was silent on the concept of Limited Liability Companies' pledging shares though it was a possibility; there was a considerable risk involved.    Rights and Removal of the Manager The CCL stipulates that a company can have more than one manager . The appointment of the manager can be done from within the shareholders or from outside the scope of the shareholding structure. If the Memorandum of Association does not specify the appointment of the manager, the shareholders have the right to appoint someone via a separate agreement. If the Memorandum of Association and the shareholders are quiet on the appointment of the manager, the General Assembly has the right to appoint the same Pursuant to the old law, the manager of the company remains liable for any company's actions against any third parties. The rights of the manager remain the same as the old law.   Article 85 of the CCL deals with the removal of the manager. The manager may be removed in the following ways: i) by decision of the General Assembly; ii) by an order of the Court upon request for the shareholder/s upon production of a legitimate reason for the removal;   The new CCL also provides for a manager to submit his resignation to the General Assembly that must advise the relevant authority. It is required that the General Assembly submit its decision for the acceptance of resignation within 30 days of receiving the notification from the manager. If no decision is reached upon after the expiration of the thirty days, the resignation is deemed accepted   General Assembly Article 92 of the New CCL retains provisions for the annual General Assembly Meeting, to be held at the invitation of the Director or the Board of Directors- at least once a year- within a period of four months immediately following the last fiscal year. The extra-ordinary general meeting can be called by the any of the partners representing at least 25 percent of the capital.      The matters for consideration in the annual General Assembly Meeting are set out under Article 94 of the New CCL and stated below:   1. Manager's report on the company's financial position during the financial year, auditor's report and the report of   the Supervisory Board. 2. Balance sheet, profit and loss account and ratification.   3. Profits that are distributed to the partners. 4. Hiring managers and determine their remuneration.   5. The appointment of members of the Board of Directors (if any).     6. Appointment of members of the Supervisory Board (if any).   7. Appointment of members of the supervisory committee and non executive members if the company operates in   accordance with the provisions of Islamic Sharia. 8. The appointment of one or more accounts auditor and determine their remuneration. 9. Other matters that fall within its jurisdiction under the provisions of this Act or the provisions of the Memorandum of Association.    In Article 93, the new law has retained the key provisions with regards to General Assembly and Annual General Assembly meetings. The new law has paved the way for employing different methods of communiqué in relation to the method employed for the same. In the past, it was essential to use registered mail to send invitations for meetings, communication and such twenty one (21) days prior to a meeting. The new CCL allows for the use of modern technology and permits the shareholders to decide the mode of communication for invites to meetings. The use of modern technology means that the notification period has been reduced to fifteen (15) days.   The new CCL in Article 96 has changed the quorum requirements for the shareholders' meetings. In the old law, it was required that shareholders holding fifty percent (50%) of the share capital had to be present for the meeting to reach a quorum; the new CCL has raised this to seventy five percent (75%). If a quorum cannot be reached in the first meeting, the next meeting is to be scheduled within fourteen days and should be attended by shareholders with a stake of at least fifty percent (50%); the third meeting should be scheduled within thirty days of the second meeting and should be attended by at least one shareholder.   The New CCL is only one of several significant legislative changes that have been eagerly awaited by the UAE business and professional community in recent years. There are no major changes that current operating companies need to comply with or any deadlines to be met. It is hoped that efforts to diversify the UAE economy by encouraging increased entrepreneurship and foreign investment.     ]]>Tue, 24 Nov 2015 12:00:00 GMT<![CDATA[Healthy Competition ]]>

    In his book "An Inquiry into the Nature and causes of the Wealth of the Nations", economist and philosopher Adam Smith conceptualizes the idea that thriving economies are the consequence of competitive markets. He discusses how competition advances innovation, product efficiency and encourages lower prices, and contends that there must be a set of rules that protects the competitive nature within markets. Competition in the market is essentially an economic concept - when the European Union was formed, one of its principal objectives included the building of a border-free internal market, where trade amongst member states could occur efficiently. Competition policies were integral in the creation of such a market, and it therefore follows that lawyers practicing competition law must be well-versed with economic concepts. 

      Competition Law ("The good, the bad and the ugly"1 ) is discussed in detail in UAE Federal Law Number 4 of 2012 (the Law). The Law governs market behavior and ensures that dominant market positions are not abused, specifically by prohibiting the use of a dominant position in a market to restrict competition. Actions that can constitute an abuse of dominance include but are not limited to: imposing resale price terms, predatory pricing, discriminatory pricing, refusing to deal, compelling others not to deal, restricting supply, conditioning the sale of a good or service on the purchase of another good or service, and/or disseminating false information about products or prices, as well as artificially increasing or decreasing quantities in a market.2 Yet although such provisions are clear and unambiguous, legal professionals in the UAE will unanimously agree that confusion arises concerning the implementation and effect of the Law. The terms of the same did not clarify how the provisions therein should be implemented, which invariably caused uncertainty with regards to the scope of the Law. Further guidance was therefore required.   Consequently, on 27 October 2014 the UAE Cabinet issued Cabinet Decision Number 37 of 2014 (the Regulations). The Regulations go some way towards clarifying various aspects left uncertain by the Law, with the effect that the combined provisions are now widely considered as successfully implementing the intended purpose of the legislation.   As discussed in our aforementioned article, the Law requires that certain acquisitions and mergers are granted merger control clearance by the Ministry of Economy. This rule was applied to ensure that certain acquisitions with the potential to exceed market share thresholds within the "relevant market" were kept under check so as not to affect competition. The Regulations define the process for the application of the merger control clearance. Essentially, the applicants must submit a completed application which is then examined by the Ministry of Economy and submittedto the Minister of Economy. The Minister then has the authority to approve or reject the application within 90 days of receipt, and will notify the relevant parties. It is imperative to note that the approval from the Minister may or may not be accompanied by various conditions. The Minister can discretionally extend his decision making period by a further 45 days.    The Regulations also lay out the process for filing a complaint in the event of any violations of the Law. The process requires the complainant to submit a complaint and certain documents substantiating the complaint. The Ministry of Economy will then either accept the complaint and investigate it further or reject the complaint. If the complaint is accepted, the Ministry of Economy will notify the concerned parties and invite them to defend the contentions. The Ministry will review the complaint, the allegations and the defense before they issue a report and their recommendation to the Minister who will deliver a decision within 30 days from the receipt of the report.    It is noteworthy that any state owned establishments are exempt from the application of the Law. This exception also has the effect that any entities owned or controlled by local and/or federal government are additionally exempt from the scope of the Law. However it is imperative to note that the Law does not expressly state the amount of control the local and/or federal government must have within the entity in order for this exemption to apply. The Law also excludes "Small and Medium Enterprises" from its remit, but fails to define "Small and Medium Enterprises" thus creating further ambiguity with regards to scope. Interestingly, the remit is narrowed further by the exclusion of number of highly regulated sectors of industry, such as pharmaceuticals, transportation, oil and gas, and telecommunications.   Despite the clarification provided by way of the Regulations, legal professionals have identified further areas of uncertainty. The Regulations have not established any threshold defining the market share which may require the parties to file for a merger approval. The Regulations have also failed to explain or define the terms "dominant position" and "relevant market". This essentially means that there is no way to determine if a party has breached the relevant market share provisions, as the market share threshold trigger has not been stipulated. In light of this uncertainty, the current approach requires all transactions to obtain merger control clearances and undergo the scrutiny of the Ministry of Economy, which seems cumbersome and contrary to the aim of facilitating trade. Furthermore, the Regulations are silent on how the Ministry or the parties involved in the merger will be able to substantiate the impact of the competition at the time of the filing. This is a result of there being no definition of the term "relevant market."   The UAE has always embraced the incorporation of best practices from across the globe. The curbing of market dominance has therefore been a paramount concern, and the implementation of the Law may be acknowledged as a positive step towards achieving universal standards. Further to the Law, the execution of the Regulations has undoubtedly been an affirmative stride towards achieving the overriding objective, but a number of further clarifications are required in order to implement the international standard of competition legislation as is in place elsewhere in the world. Until such time, it is not possible to determine the scope of the Law and its effectiveness. Further guidance concerning the full effect of the Law is awaited – watch this space!        ]]>
    Fri, 03 Jul 2015 12:00:00 GMT
    <![CDATA[Introduction]]> Despite the fact that the Arabic world marks Al-Hijra at the start of Muharram (the first month in the lunar Islamic calendar) and the Chinese community celebrate the "Spring Festival" at the turn of the Chinese lunisolar year in late January/early February, the Gregorian calendar's New Year marks a new beginning for millions of individuals across the globe. The way in which we celebrate this varies from place to place – in parts of South America, the colour of one's clothing is said to symbolize hopes and desires for the year to come (red for love, yellow for wealth), whereas in Spain it is believed that consumption of grapes on the strike of midnight will bring prosperity over the coming twelve month. The same may be said of wearing polka dots in the Philippines, and burning torches and fireballs are believed to drive out the impurities of the dying year at the Scottish festival Hogmanay. However the underlying principle is the same – it's out with the old and in with the new.

    Yet some things never change. Like your trusty, innovative and high-quality legal publication, Court Uncourt. Marking the New Year with a new volume, we at STA promise to continue in our efforts to bring you the latest legal news with our trademark bespoke twist.

    We wish you a blessed New Year and an enjoyable read.

    ]]>
    Fri, 27 Mar 2015 12:00:00 GMT
    <![CDATA[Там, где есть воля, там есть путь: Часто задаваемые вопросы о законе наследования - Дубай и ОАЭ.]]> Там, где есть воля, там есть путь: Часто задаваемые вопросы о законе наследования - Дубай и ОАЭ.

    "Мы не должны забывать, что для наших потомков в их время будет также важно быть успешными, как и для нас в наше время."

             Теодор Рузвельт

     

    Исламские законы наследования, которые здесь уже обсуждались, могут быть практически реализованы во многих существующих западных системах законодательства путем написания действительного завещания. На самом деле, для тех мусульман, которые живут на Западе, завещание становится существенной необходимостью для предотвращения нежелательного использования их имущества после смерти. Завещание должно соответствовать законам страны, для того чтобы быть исполнено без каких-либо юридических проблем. Важно отметить, что если завещание пишется в соответствие с законами ОАЭ (в случае экспатриантов), то оно также должно соответствовать законам Шариата и не должно противоречить ни одному из его принципов.

    Планирование наследования это термин, используемый для планирования распределения имущества лица после того, как оно покинет этот мир. Если человек умирает без оставления завещания, имущество умершего распределяется в соответствии с законами страны. Другими словами, если у вас нет завещания, то нет документа, регулирующего распределение вашего имущества. «Имущество» относится не только к недвижимости, но и к любым ценностям, таким как денежные средства, банковские счета, машины, мебель, книги, облигации, инвестиции, ювелирные изделия, наследство семьи и др. Ваша «Последняя Воля и Распоряжение» является документом, описывающим в точности, что бы вы хотели сделать с вашим имуществом в случае вашей смерти. Документ может охватывать все аспекты вашей жизни, от физических активов, таких как недвижимость, инвестиции и наличные средства до ваших последних пожеланий.

    Вопрос 1. Зачем нужно завещание? Какова необходимость и каковы риски, если его нет?

    Завещание всегда важно, чтобы обеспечить права на собственность владельца в пользу его/ее наследников в случае его смерти. Оно определяет последующего владельца собственности, и после вас указанное лицо будет заботиться или вступит во владение активов в случае вашей смерти. Важно написать завещание и исключить все риски будущих споров или возможность, что государство конфискует собственность в случае отсутствия завещания. Если умирает экспат в Объединенных Арабских Эмиратах (ОАЭ), банкам предписано судом заморозить все операции по счетам умершего, в том числе по совместным счетам. Даже совместные активы между мужем и женой будут заморожены до тех пор, пока не выяснится наследство. Однако, законы Шариата отдают предпочтение урегулированию обязательств умершего до распределения активов, поэтому размораживание счетов и активов может быть произведено по приказу Шариатского суда, только если существует заверенное завещание. Этот процесс направлен на защиту любых платежей, которые должны быть выполнены после того, как экспат умирает, такие как непогашенные кредиты и долговые платежи. Уместно отметить, что при отсутствии завещания в ОАЭ как мусульманской стране, собственность может не перейти человеку, которому бы вы хотели. Закон Шариата автоматически применяется к мусульманам и немусульманам владельцам собственности, когда они умирают в ОАЭ.

    Вопрос 2. Будут ли законы наследования и завещание моей родной страны (в случае экспатов) преобладать над местными процессами ОАЭ, которые следуют принципам Шариата?

    В случае, если человек любой религии умирает, не оставив завещания, суды могут придерживаться законов Шариата в отношении наследования имущества и опеки над детьми. Вопросы наследования в ОАЭ управляются, главным образом, двумя федеральными законами: Закон о Личных Делах №28 от 2005 г. позволяет экспатам-немусульманам, живущим в ОАЭ использовать закон своей родной страны, чтобы распределить свои активы в ОАЭ. Это независимо от того, имеет ли экспат-немусульманин юридически заверенное завещание в своей родной стране. Другими словами, потомки могут подать заявление на завещание в своей родной стране после кончины члена семьи, которое позволит им распределить активы в ОАЭ так, как этого хотел умерший.

    Вопрос 3. Является ли закон ОАЭ применимым только к гражданам ОАЭ, или ко всем мусульманам, или даже ко всем экспатам независимо от национальности и религии? 

    В случае отсутствия завещания, в ОАЭ как мусульманской стране, закон Шариата применяется к мусульманам и немусульманам владельцам имущества в случае их смерти. 

    Вопрос 4. Я владею бизнесом в партнерстве в Дубае. Я владею большей частью бизнеса, за исключением части, которая должна принадлежать местному партнеру по действующим законам. Распределение прибыли предусматривается сторонним соглашением. Я плачу местному партнеру годовой единовременный взнос – он является спящим партнером? Если я умру, кто будет иметь право на все мои активы и распределение прибыли в компании?

    Владельцам бизнеса приходится сложнее. Владельцы малого и среднего бизнеса, а также владельцы крупных конгломератов могут потерять гораздо больше, так как ведение бизнеса требует существенной базы активов на местном и международном уровне. Отсутствие надлежащего планирования наследства может привести семью от жизни миллионеров до бедности за считанные дни. Распределение активов и доли прибыли в любом бизнесе после смерти одного из партнеров может быть оговорено в стороннем соглашении, но факт остается фактом, это событие вероятнее всего вызовет вопросы и споры в отношении средств бизнеса. Будучи экспатом, являетесь ли вы наемным работником или владельцем собственного бизнеса, пожалуйста, уделите время, чтобы сосредоточиться на собственном планировании наследства и уберечь семью от финансовой беды, которое может последовать, если с вами что то случится в ОАЭ.

    Вопрос 5. Какой тип завещания должен я написать и должно ли оно быть нотариально заверено и легализовано?

    Закон о Личном Статусе не подразумевает, что завещание, написанное по законам другой страны, положения которого противоречат Шариату, может быть выдано. Ссылка на статью 1 (2) и статью 424. Поэтому нет такого понятия, как завещание ОАЭ. Завещание должно быть составлено экспертами в соответствие с законодательством страны экспата, принимая во внимание вопросы дарения, налогообложения и другие вопросы. Если юрисдикция автора завещания требует нотариального заверения или легализации, то рекомендуется придерживаться этого положения в ОАЭ. 

    ]]>
    Thu, 25 Sep 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?

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    Mon, 05 May 2014 12:00:00 GMT
    <![CDATA[ОАЭ Закон о Защите Kонкуренции]]> "Представители компаний, предоставляющие одинаковые товары или услуги редко встречаются вместе, даже для развлечений и веселья, но их переговоры  за спиной потребителей зачастую заканчиваются решением  о повышении цен.."

    I. ВВЕДЕНИЕ

    В бизнес среде никакое другое слово так часто не обсуждается, порицается, более интересно, и в то же время менее понятно, чем «конкуренция». Этому простому слову также посвящена наша статья. На самом деле, слово «конкуренция» имеет различное значение для юристов, экономистов и для бизнес сообщества. Эти реальные и теоретические различия стоят в основе развития масштабной и рациональной политики по контролю над бизнесом. Объединенные Арабские Эмираты (ОАЭ) осознали и предприняли эффективные шаги для объединения этих различий путем принятия Федерального Закона номер 4 от 2012 года о Защите Конкуренции, который вступил в силу 23 февраля 2013 года. 

    С приведением в исполнение данного закона Правительство ОАЭ стремится обеспечить структуру работы для иностранных торговых компаний в вопросах, касающихся продажи и перепродажи, ценообразования, сговора,  злоупотребления доминирующим положением на рынке, ограничения завышенных цен и цен для перепродажи, и что интересно, самые суровые наказания за нарушение конфиденциальности.

    II. РАЗВИТИЕ ЭКОНОМИКИ.

    ОАЭ стали значительным коммерческим центром, дающим возможность людям со всего мира вести здесь свой бизнес. ОАЭ превратились из государства, зависимого от нефти и газа, в экономику, привлекающую иностранных инвесторов и обеспечивающих пространство для ведение диверсифицированного бизнеса. Демонстрируя укрепления рынка недвижимости и увеличение присутствия международных брендов, высокие объемы торговли нефтью и газом и размещение одного из лучших в мире Финансовых Центров, Дубай и ОАЭ это действительно страна возможностей для многих. Этот устойчивый рост – результат тщательно продуманной политики и обязательств по предоставлению лучшего для всех. С ростом приходит риск[i].


    [i] Слово «риск» имеет здесь широкое значение, но интересно заметить, что данное слово берет происхождение от древне-итальянского «risicare»,  что означает «осмелиться, сметь».

    III. КОНКУРЕНЦИЯ – ХОРОШО, ПЛОХО ИЛИ УЖАСНО?

    Попытка равняться или превзойти другого, преследование похожего объекта – эта традиция стара как мир и среди торговцев и в бизнес-сообществе. С одной стороны, слово «конкуренция» несет в себе позитивное значение, потому что она стимулирует и мотивирует людей работать лучше. С другой стороны, в некоторых случаях она просто означает доминирование. Последние тенденции в мире бизнеса, в частности глобализация и передовые технологии оказали значительное влияние на большинство компаний. Компании внедряют глобальные стратегии, входят в стратегические альянсы путем создания совместных предприятий, слияния и т.д. с целью укрепления влияния на рынке. Главным следствием этих тенденций является усиление конкуренции, которое существенно поднимает вопросы, связанные с доминированием на рынке.

    IV. ПРАКТИЧЕСКИЙ ПРИМЕР

     Мистер Си, владелец супермаркетов АВС, решил выдать свою единственную дочь за рисового магната из Индии, Мистера Ми. Помимо всего прочего Мистер Си и Мистер Ми обсудили деловые вопросы и возможные сделки, которые они могут провести. Мистер Ми в качестве доброго жеста решил уступить Мистеру Си 5 контейнеров риса по цене на 70% ниже рыночной. Обрадовавшись новоиспеченному родству и полученной выгоде, руководство магазинов Мистера Си решило подарить 1 килограмм риса каждому покупателю, совершившему покупку более, чем на 500 дирхам. Пока празднование продолжалось, руководство другой сети гипермаркетов JKL, стало беспокоиться, что их бизнес под угрозой срыва.

    После нескольких внутренних совещаний и мозгового штурма, команда по маркетингу гипермаркета JKL предложила руководству закупить большую партию риса у супермаркетов АВС. Следуя совету, JKL закупили 20 контейнеров риса у супермаркетов АВС. Мистер Си, в свою очередь, запросил у своего родственника, Мистера Ми, новую поставку риса. Радуясь, что он в выигрыше с обеих сторон, Мистер Си поставил рис в гипермаркеты JKL.

    Незамедлительно после доставки риса, менеджмент JKL решил провести промо-акцию, предлагая покупателям 1 кг риса за каждую покупку в 500 дирхам. И только тут Мистер Си понял, как его одурачил более находчивый конкурент, обладающий теперь более значительными запасами риса, чем АВС! Мистер Си обвинил менеджмент JKL в злоупотреблении доминирующим положением, вызвавшим убытки в виде потери прибыли, потери возможности и т.д. В результате, покупатели выиграли от этого соревнования, в то время как АВС пострадал от «конкуренции».

    Злоупотребление доминирующим положением может также означать отказ одной из сторон в предоставлении товаров, важных средств или услуг другим сторонам. Европейский Суд определил «доминирование» как:

    «Субъекты находятся в доминирующем положении, если они имеют возможность вести свою деятельность независимо, не принимая во внимание своих конкурентов, покупателей или поставщиков… они имеют возможность устанавливать цены или контролировать производство или распределения для значительной части рассматриваемых товаров…»…"

    V. ОТРАЖЕНИЕ ДОМИНИРУЮЩЕЙ ПОЗИЦИИ НА РЫНКЕ В ЗАКОНАХ ОАЭ

    Федеральный закон номер 24 от 2006 года, относящийся к защите потребителей, был еще одним законодательным актом, направленным на защиту прав и интересов потребителей в целом.

    Настоящий закон о конкуренции, пожалуй, имеет самый широкий охват среди своих аналогов, но и он не проливает свет на тонкую грань, когда ситуация на рынке является доминированием. Статья 6 недавно принятого закона о конкуренции охватывает понятие злоупотребления доминирующим положением. Доминирующее положение определяется как исключительное положение, позволяющее любому учреждению, самостоятельно или при участии других субъектов, преобладать или существенно влиять на существующий рынок. Закон предусматривает наказание от 500,000 до 5 миллионов дирхам, или закрытие бизнеса от 3 до 6 месяцев за действия, которые могут быть расценены как злоупотребление доминирующим положением. Использование слов «стимулирующая среда» для учреждений и поддержание «конкурентного рынка» во вступительной статье к Закону указывает на идею и послание, стоящее за реализацией данного закона. Толкование и применение Закона Судом и исполнительными органами остается поводом для отдельной дискуссии..

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    Tue, 11 Mar 2014 12:00:00 GMT