СТА - ведущая юридическая компания в Дубае с офисами по всему мируhttps://www.stalawfirm.com/ru.htmlSTA Law Firm - Блоги - UAE Corporate LawruCopyright 2024 STA Law Firm All Rights Reserved<![CDATA[The New Maritime Law of the UAE]]> The New Maritime Law of the UAE

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

Vessel Registration

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

In contrast to the capped foreign ownership set at 49% under the Repealed Maritime Law, this provision establishes a more inclusive and accessible framework, potentially broadening investment opportunities within the maritime sector.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 Meanwhile, Article 368(2) stipulates that existing resolutions and regulations under the Repealed Maritime Law will remain applicable, provided they do not conflict with the New Maritime Law, until new executive regulations are promulgated.

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

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

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

Dispute Resolution Mechanism

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

Ship Arrest Procedures

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

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

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

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

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

Conclusion

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

 

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Mon, 11 Mar 2024 00:00:00 GMT
<![CDATA[10 Reasons to Hire All-Rounders for Your Legal Needs in UAE]]> Legal matters can be stressful for many people. Lawyers in UAE know the ins and outs of the law, but they also have other skills that make them well suited to handle various legal needs. Lawyers are trained and experienced with contracts, real estate transactions, family law cases, civil litigation and criminal cases. They help their clients navigate through complicated areas of law so they can get back to living their lives as soon as possible. So why not hire an all-rounder?

Reason #1: Lawyers in UAE have the expertise and knowledge to help with all of your legal needs.

Reason #2: They are trained professionals who can handle any case you may need them for, unlike a general practice attorney or law firm.

Reason #3: An All-around lawyer can deal with civil litigation cases such as contract disputes, family law cases like divorce proceedings and child custody battles, criminal matters involving theft offences, assault charges or drug-related crimes.

Reason #4: Lawyers also know how to draft contracts which means they understand what needs to include when parties enter into agreements about real estate transactions or business operations.

Reason #5: Attorneys specialize in certain areas, but lawyers are experts at everything, so it's best if one person handles every aspect of your case.

Reason #6: Lawyers are usually cheaper than a specialist, and they have the skills to defend your trial in court should it go that far.

Reason #7: Lawyers also know how to deal with criminal matters involving theft offences, assault charges or drug-related crimes, which can be especially beneficial for people who live outside of UAE on work visas.

Reason #8: All-rounders help you save time and money by not needing an additional lawyer when changes occur during their representation, like when custody arrangements change so that lawyers might recommend divorce proceedings instead. Lawyers don't need as much information upfront because they will take over once contacted by the client about an issue. Lawyers have more connections than specialists do which means access to resources is more effortless.

Reason #09: Lawyers can provide services in more than one language, which means you don't have to find someone who delivers your native tongue.

Reason #10: Lawyers will not judge or be biased against you because they're there for all types of people.

Reason #11: Lawyers know how and when a court proceeding should end to avoid going on forever like an endless loop that wastes time and money.

Reason #12: Lawyers are trained professionals who understand the law and have other skills from their backgrounds like engineering or healthcare. They'll go over what's covered by insurance with clients before any legal work starts.

Reason #13: Lawyers believe justice is about integrity, fairness and equality under the law. Lawyers also know how to talk about a case without using technical jargon, which means there's less confusion and misunderstanding for their clients.

Reason #14: Lawyers can help you with any legal issue because they're trained professionals knowledgeable in all areas of the law, not just one or two like some attorneys or lawyers might get trained.

The bottom line is, hiring the right attorney or legal team can make all of the difference in your case. When you're looking for Lawyers in UAE to represent you and your business interests abroad, there's no substitute for an experienced professional. They understand how cases like yours work, what issues might arise at any point during litigation, and what can be done regarding them before they do. Give a call today and speak with one of the knowledgeable attorneys so that they can help guide you through this process while giving you peace of mind!

 

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Tue, 14 Sep 2021 14:45:00 GMT
<![CDATA[JAFZA Offshore Companies Regulations]]> UAE Compan's Law and JAFZA Offshore Companies Regulations : Key Differences

All corporations undergo a development phase that is affected by a range of external factors such as market conditions, economic climate, implications, and new regulations, to name a few. Internal affairs of an organization, the roles and responsibilities of the company's directors, and principal officers also influence its development. A mix of external and internal factors may lead a company to consider the best available alternatives. For instance, an unstable economic climate and unfavourable market conditions may cause financial difficulty for an investee company, thereby affecting their expectations. Such factors finally call upon shareholders and board to reconsider their position and weigh in other options which may include refinancing, restructuring, or eventually, parties may end up in a dispute.

Contentious disputes are often driven and led by a belief that other shareholders or board members have acted improperly or breached the terms of agreement. These differences or disagreements often come into limelight when matters have set a clear tone for possible litigation. The shareholders of an investee company also get into a dilemma where offshore company is one of the shareholders and the law governing offshores varies significantly from that of the laws of the country where the company received such investment.

Within the United Arab Emirates, the UAE Commercial Companies Law (Federal Law Number 2 of 2015) (the Law) is the primary legislation within which most corporate entities are regulated. The Law sets out extensive provisions for types of entities, the shareholding composition, the rights and obligations of the parties so involved, matters relating to voting rights, transfer of shares and other essential provisions. The Law also applies to free zones within the United Arab Emirates, and businesses and investors often reach out to their counsels to understand legal implications of these varied provisions to cement their relationship and/or to obtain advice on other key areas. This article seeks to discuss entity form not covered under the Law – being the Jebel Ali Offshore Company Regulations (the Regulations or JOCR). The Jebel Ali Free Zone Authority, commonly known as JAFZA, has issued JAFZA Offshore Companies Regulations (JOCR), 2018 applicable to all the Offshore Companies formed with the Authority and have repealed and replaced the JAFZA Offshore Companies Regulations, 2003.

The underlying purpose of discussing the Regulationsis to understand three principle components covered therein and how they vary from the Law. In essence, these are:

  • A general overview of the Law and the Regulations including formation and procedural aspect;
  • Understanding the liability of shareholders under an LLC form of entity pursuant to the law vis a vis. the liability of shareholders under the Regulations;
  • Provisions governing the transfer of shares;
  • Role of managers (or; the managing director) andtheir liabilities; and
  • Provisions surrounding annual general meeting or the general assembly and voting rights.
  • The Law repeals the earlier enactment being the UAE Commercial Companies Law (Federal Law Number 8 of 1984). The Law also provides for different forms of companies such as limited liability company, public joint-stock company, private joint-stock company, to name a few. Still, for this article, we discuss the relevant entity type, being the limited liability company (the LLC). The Regulations were presented primarily to introduce the offshore form of companies within Dubai. For Corporate inverstors, the Dubai Land Department required all freehold properties within the city to be registered under the offshore form of company. The Regulations were introduced to enable 100% foreign ownership as JAFZA allows its clients to operate as a wholly-owned entity, without any requirement for local partnership.

    Moreover, the shareholder's liability is restricted to the amount of its paid-up share capital. While offshore entities certainly have distinct advantages, the purpose for which investors form such special purpose vehicle them may vary for a variety of reasons. A comparison between the setup of an offshore company and a limited liability has been discussed below to gain a clearer perspective on the same.

    As per the provisions of the Law, an LLC can be formed with a minimum of two (2) shareholders and a maximum of fifty (50) persons. One natural or corporate person may solely own shares in an LLC (one person limited liability company provided these shares are registered in name of UAE national or company 100 percent held by UAE nationals. The liability of shareholders under the Law is limited to the extent of shares held by them, and the same has been provided for under Article 71 of Law. The LLC also requires that UAE Nationals effectively own a mini mum fifty-one per cent (51%) shares in such company. Readers are advised to read more on UAE Anti Fronting Law which aims at prohibiting the use of side contracts between foreign companies and UAE nationals that enables foreigners to undertake any economic or professional activity that is prohibited by the UAE law. The Regulations, on the other hand, permit one or more persons to apply for a certificate of incorporation and obtain a license for an offshore company with limited liability. Clause 5.1 of the Regulation provides for the above.

    In an LLC, a partner may transfer his shares to other existing partners or any other third parties which shall be made as per the terms of the MoA of the company, under an official document per the provisions of the Law under Article 79 of Law. In JAFZA Regulations, the transfer of a share in an Offshore Company must be done through an instrument of transfer in writing. It must be submitted to the Registrar for approval along with the applicable fee to JAFZA as laid out under Clause 24.1. The Manager of an LLC shall be liable for any losses or expenses incurred due to improper use of the power or the contravention of the provisions of any applicable Law or the MoA of the company or for any gross error conducted by the Manager (Article 84 of Law). Whereas in the case of the JOCR, a Director of an offshore company must disclose an interest (direct or indirect) in a transaction entered/proposed to be entered into by the Offshore Company which conflicts with the interests of such a company (Clause 36 of the regulation).

    The quorum at the general assembly has been laid down under Article 96 of the Law and Clause 51(f) of the Regulations in offshore companies. Consistent with the provisions set out in Article 96 of Law, in an LLC, the quorum at the General Assembly shall not be valid unless one or more partners holding at least 75% of the capital of the company are present in the meeting. However, if such quorum of partners holding at least 75% of the capital of the company is not present at the meeting, then the partners shall be invited to another meeting, to be held within fourteen (14) days from the date of the first meeting provided that at least 50% of the capital is present at this second meeting. If both these conditions are not met with, then there will be a third meeting held upon the expiry of thirty (30) days from the date of the second meeting. A quorum at the third meeting shall be valid irrespective of the partners present at the meeting. The Decisions by the General Assembly shall not be valid unless passed by the majority of the partners present in person and those represented at the meeting unless the Memorandum and Articles of Association (the Constitutive Documents) provide for a higher majority. Accordingly, in cases where the Constitutive Documents require a higher majority, the decisions passed by the General Assembly with a lower majority will not be valid. In an offshore Company under Clause 51(f) of the Regulations, the voting at a general meeting will be held to be valid, only if the shareholders holding, shares representing 95% (ninety-five per cent) of the total capital of the Offshore Company are present.

    Interestingly the reasons for the imposition of this 95% rule imposed by the Regulations pursuant to Article 51(f) is unclear. One may ask why such an imposition of 95% majority? Further, if such imposition were at 99%, what difference would that make? Comparatively, the regulations regarding the quorum of a general assembly in other offshore jurisdictions (discussed below) requires standard majority which is generally set at 75% of the share capital owned by the shareholders in a general meeting. Imposing the high bar 95% rule could, in some cases, affect the rights and interests of decision-makers and often force them to consider litigation. Consider by way of example a case where disputing litigants are tasked with substantial negotiation(s) for several mainland companies and free zones companies in addition to a small offshore entity that is integral and important to the settlement process. Further assuming that parties have (in principle) achieved a settlement on all the entities but the offshore's majority rule creates a snag for want of 95% rule imposition. In such event, the parties may have to deal with the offshore firm separate to the entire settlement process and thereby requiring the Some of the provisions for offshore companies in other jurisdictions about voting rights call for a lower percentage. For instance, under the prevailing regulations of Cayman Islands Company Law (Companies Law of 2013), a majority of at least two-thirds is required for approving a decision in a general assembly of an offshore company, unless the articles of association specify that the required majority shall be a number higher than two-thirds. Under the British Virgin Islands (BVI Business Companies Act No 16 of 2004) a resolution passed by the general assembly in an offshore company shall be approved by a majority over 50% or in case the MoA requires a higher majority. In a foreign company in Guernsey (Companies Law of 2018), a resolution that is passed at a general meeting on a poll is given by the relevant majority of the voting rights of members who, vote in person or by proxy on the resolution. The requirements for a poll are based on the majority being assessed not against the total voting rights of the company, but against the complete voting rights of those members who do choose to vote. In Bermuda, (Companies Act, 1981 of Bermuda), resolutions of shareholders generally require to be approved by a simple majority.

     

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    Sun, 01 Mar 2020 11:34:00 GMT
    <![CDATA[Special Purpose Vehicles ADGM]]> Abu Dhabi Global Market (ADGM) – Special Purpose Vehicles (SPV) and Foundations

    As a company within the Middle East, there are many seemingly insurmountable risks, such as financing, asset transfers or high-risk opportunities, which risks previously held no viable risk mitigation alternatives. However, the ADGM now supplies a competitive entity for which mitigates such risks. The risks as abovementioned could include, for example, should a company wish to engage in a project that is considered to be high-risk – such as the purchasing of an aircraft – such company may utilize the creation of an SPV to isolate this project risk from the parent company. In what follows will be a comprehensive breakdown of the many advantages of SPV's as well as their practicality and ease of company formation in ADGM.

    At the outset, it is pertinent to thoroughly examine what an SPV is and why a company would utilize such an entity. An SPV is a legal establishment which is formed to fulfil a limited, specific or temporary purpose. They are entities distinctively used by companies to isolate the parent company from a particular financial unpredictability. The official definition of an SPV is "a fenced organisation having limited predefined purposes and a legal personality."

    The ADGM has stepped into the forefront in respect of their SPV regime, offering a dynamic and extensive scheme which caters to numerous industry sectors and a range of uses.

    In the below table is a depiction of the typical uses of SPVs

    Use

    Why

    Securitisation

    The utilisation of an SPV can be as an entity through which a company can securitise a loan. In this respect, the SPV will purchase these assets by issuing debt. A debt, the security of which, is on such an underlying asset. This provides a priority right to those persons who are holders of the asset-backed security to receive payments in respect of the debt while curbing the recourse they might have to the originator of the assets.  

    Risk-sharing

    As has been eluded to above, an SPV can be formed by a company to shield the company from high-risk projects and to provide a possibility to other investors for risk-sharing. This entity is especially useful in joint venture projects for isolating partners from risks inherent in certain joint ventures.

    Finance

    An SPV can be used in this capacity for ring-fence investments, this can be utilized to gain financing without increasing debt levels of the parent company.

    Asset Transfer

    In respect of asset transfer, many permits and requirements may be needed for the operation of certain assets, for instance, a mine or a power plant. The attainment of such permits may be arduous, and such permits are often non-transferable. The way in which an SPV will relinquish the burden of the abovementioned can be that the SPV owns the asset along with all permits and authorisation and should the parent company wish to transfer the assets, they can do so through the sale of the SPV, thereby transferring the assets and permits in unison.

    To Maintain Secrecy of Intellectual Property

    This use for an SPV holds many applications and advantages, one being the protection of intellectual property rights of companies from pre-existing licensing deals the company may have with competitors. Additionally, it can be used to separate valuable Intellectual Property into an entity with minimal liabilities and provides it with the opportunity to raise funds and enter into agreements with third parties separate from that of the parent company.

    Financial Engineering

    An SPV has the capability of being utilised as a method of tax avoidance or a way of manipulating financial statements.

    Regulatory Reasons

    An SPV can be set up with an orphan structure to circumvent statutory restrictions, such as regulations relating to the nationality of ownership of specific assets.

    Property Investing

    An SPV can be utilised in the process of acquisition of real property, and this respect will afford limitation of recourse of mortgage lenders – this is dependent on the location of the asset. As was seen above in respect of the transfer of assets and the certain permit transfers, the same is true for the property transfer. An SPV that owns a property can be sold to a person interested in acquiring the property, and in this respect, persons can circumvent high taxes and fees that go hand-in-hand with the transfer of property. 

     

    A famous example of utilisation of an SPV as securitisation of intellectual property is that done by David Bowie (Musician). In order to enhance cash flow, the formation of an SPV for which Bowie sold his assets to, such assets include the right to certain future royalty payments from certain albums. This SPV then issued what was known as Bowie Bonds, for which the record distributor provided specific credit enhancements. The underlying copyrights secured the bonds, and if the SPV defaulted on its payment obligations to bondholders, the copyrights are permanently transferred to bondholders.

    ADGM SPVs are "exempt" structures, and this consideration is brought about due to the fact that they do not fall under the immediate supervision of the Financial Services Regulator. Such SPVs offer sophisticated ownership structures and propose a particularly innovative and flexible mechanism. They combine dematerialised SPVs into substantiated holding companies.

    To surmise: -

     

     

    The breakdown

     

    It's Suitability

  • Proprietary investment;
  • Securitisation;
  • Holding;
  • Capital raising;
  • Advantages

    • Dependability;
    • Adaptable;
    • Different share classes;
    • Applicability of the common law;
    • Acceptance of trusts, funds as holder, and foundations;
    • Capable of morphing;
    • No foreign ownership restrictions;
    • Tax Residency – all ADGM registered companies are eligible to apply a Tax Residency Certificate from the UAE Ministry of Finance to benefit from the UAE's Double Tax Treaty network.
    • Migration or continuance of existing corporate entities

    Legislative backdrop

    Common law

    Competency

    ADGM Courts

    Corporate Mitigation

    Allowed

    Protected cell companies

    Available

    Compatibility with sophisticated holding structure

    Yes

    Ownership

    Capable of being 100% foreign owned

    Registered office

     

    Minimum shareholding

    1 Shareholder

    Minimum director requirement

    1 Director and at least one of the directors has to be a natural person

    Corporate Directors

    Allowed provided there is one natural person as a director

    Minimum share capital requirement

    No minimum share capital requirement

    Evidence of capital pay-up

    Not required

    Set-up timeline

    5-7 working days

    Company name

    Prior approval required

     

    In addition to the numerous abovementioned advantages, the ADGM also offers a type of SPV which affords information disclosure protection to registered SPVs – this is through the Restricted Scope Company. This is an entity unique to ADGM which offers limited information disclosure on the public register but full disclosure to the ADGM Registrar.

    ADGM Foundations

    The concept of ADGM foundations has only recently been brought about and implemented by the financial free zone and affords individuals, and entities access to a product for which they previously had no access to. In this respect, the ADGM Foundations regime offer an alternative to trusts for the purposes of wealth management and preservation, family succession planning, tax planning, asset protection, corporate structuring, and for public interest purposes (with the exclusion of charities).

    To delve a somewhat further into what a foundation is, we can begin by noting its similarity with that of a trust, the use of a foundation as described above depicts its vast similarity – the main difference here is that trusts find their basis in the common law, while foundations are derived from the civil law.

    A notable difference between foundations and trusts is that foundations are incorporated as a legal entity and carry their distinct attributes and legal personality. It is in this characteristic that foundations are comparable to a company; however, they lack the company component of shareholding. The foundation will hold the title of assets in its own name on behalf of beneficiaries, and the establishment of such must carry a particular and specific objective. The foundation may not engage in any commercial activities which fall outside of the scope of activities necessary for the attainment of the purposes of the foundation.

    The person who is responsible for the creation of the foundation will be the "founder", and such a person will transfer assets to the foundation which will subsequently become the property of the foundation. A further differentiation between a foundation and a trust is seen in that, and unlike a trust, a foundation safeguards the founder's ability to exercise control over a foundation. Should the founder die, this will have no effect on the foundation, and it will exist perpetually after the death of the founder. 

    ADGM is a market leader within the United Arab Emirates in respect of Foundation regulation and offers a variety of attractive provisions. The regime provides the domiciliation of foundations into and out of ADGM along with marginal set-up costs. The regulation too provides considerable flexibility in the amendment of governance and the utilisation of a registered agent is voluntary. The commitment requirement of primary assets is as little as USD 100, and it requires no physical office space. The regime also provides limited public disclosure with no individuals' names on the public register.

    The ADGM continues to put forward regulation and evidence which place it at the forefront of International Financial Free Zones – providing innovative and effective corporate structures to suit every commercial and financial need. The two abovementioned entity types are just basic examples of the multitude of ADGM entities. Feel free to get in touch with our team of lawyers in Abu Dhabi to learn more on setting up SPV in ADGM and setting up ADGM Foundation entity.

     

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    Thu, 21 Mar 2019 18:20:00 GMT
    <![CDATA[Exclusion Clauses in the UAE]]> Exclusion Clauses in the UAE

     

    The Importance of Contracts and Exclusion Clauses

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

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

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

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

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

    UAE Civil Code

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

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

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

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

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

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

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

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

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

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

    The Current State of Exclusion Clauses in the UAE

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

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

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

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

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

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

     

    Закон о Добыче Полезных Ископаемых

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

    - Федеральный Экологический Закон;

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

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

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

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

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

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

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

    • Она уменьшает открытые пространства в карьере / шахте;

    • Уменьшает потенциальную эрозию почв; а также

    • Уменьшает двойную обработку или почву / отходы.

     

    Постановление министров № 110 от 2010 года

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

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

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

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

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

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

    Contracts to which the doctrine applies

    Subcontractors

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

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

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

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

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

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

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

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

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

    Heirs

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

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

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

    Agreements to which a third party has a claim

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

    Bank guarantee

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

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

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

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

    Documentary credit

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

    Discharging the debt of another

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

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

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

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

    Third party insurance law

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

    Criticism of the Doctrine of Privity

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

    ]]>
    Tue, 07 Aug 2018 11:29:00 GMT
    <![CDATA[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)

     

     

    ]]>
    Mon, 14 May 2018 11:24:33 GMT
    <![CDATA[Rules of Acquisition and Merging of Public Shareholding Companies]]> MERGERS AND ACQUISITIONS: PUBLIC SHAREHOLDING COMPANIES

    "How do you make money? Mergers, Acquisitions and Liquidations"

                                                                                                                ~Mario Gabelli

    Introduction

    Sultan Bin Saeed Al Mansouri, MOE (Minister of Economy), and Board Chairman of the securities and commodities authority (SCA) was responsible for the introduction of a set of regulations concerning mergers and acquisitions of the UAE-based public joint stock companies. This decision includes three chapters comprising 61 articles which focuses on the general rules and conditions of of procurement, various definitions relevant to mergers and takeover as well as control, penalties and inspection. To be investment-friendly and ensure a promising financial system, SCA has introduced, in recent times, a series of decisions launched new systems and modified some others with the aim of efficiently developing a legislative environment and organizational infrastructure. These measures have not only encouraged and helped capital markets ensure more flexibility and responsiveness but have also boosted competitiveness, thereby enhancing and improving services provided by them.

    The FGB and NBAD Merger

    In the United Arab Emirates, partial or complete control of a public company can be acquired by way of a statutory merger process under the Federal Law Number 2 of 2015 concerning UAE Commercial Companies law (the Federal Companies Law or new CCL) as amended. Under the provisions of this law, one or more companies can merge with another company when the following process is complete. Firstly, a merger agreement must be agreed upon and signed by both the companies. Secondly, the dissolving company must acquire the approval of its shareholders by way of special resolution to approve of the merger upon which the dissolve of the company becomes effective. Thirdly, the acquiring company must acquire the consent of its shareholders, in the same way thereby increasing its share capital and permitting the company to issue shares to the dissolving company. Lastly, and most importantly, the SCA must approve the merger.

    A recent example of a merger in compliance with the new governance rules is as follows: National Bank of Abu Dhabi PJSC(NBAD)and First Gulf Bank (FGB)entered into a merger. The merger of NBAD and FGB is being effected using this statutory process and will result in the assets and liabilities of FGB being assumed by NBAD in consideration for the issues of new shares in NBAD to the shareholders of FGB. Following completion of the merger, the FGB shareholders will own about 52% of the enlarged issued share capital of NBAD.

     

    Administrative Decisions Number (62/ R.T) of 2017 Concerning Technical Requirements for Acquisition and Merger Rules has its basis on five primary consideration. Where, the first and the foremost factor is of the Federal Law number (4) of 2000 concerning the Emirates Securities and Commodities Authority and Market, and amendments thereof (the SCA Law).The SCA Law regulates the activities of securities and commodities markets in the UAE and including recent modifications of 2006 by Federal Law number (25) and Federal Law Number (6) of 2009. SCA Law provides a uniform definition of securities to be shares, bonds, and notes issued by joint stock companies, relationships, and notes issued by the federal government, local government, public authorities and institutions in the country, or any other locally or internationally acceptable financial instruments issued by SCA. It also gave legal recognition to an agent or a broker as an entity licensed and authorized under the provisions of the law to practice the concerned business in the securities and commodities market.

    The second consideration was the Federal Companies Law which was a replacement of Federal Law number 8 of 1984. This law states that all Limited Liability Companies (LLC) must review their articles to ensure that the same comply with the terms of the new CCL. Specific other conditions, although not mandatory, were encouraged to be examined within the scope of this article. A few of the changes introduced by this law were the fact that any part of the shareholder'sreports which referred to and complied with the law that was prevalent in the respective field must be changed and updated to ensure clarity. Also, the introduction of this law, shareholders now had the right to appointment of more than five managers or directors.Additionally, an explicit reference to the increase in positions of administration, the shareholders were required to amend their articles accordingly. With this arrangement, shareholders, to pass ordinary resolutions need a simple majority of the shareholders present at the general assembly as opposed to earlier where recommendations could be given only on the condition that 50% of the votes at that meeting must be secured.

    The third consideration has its basis on the Cabinet Resolution Number13 of 2000 regarding the Regulation for Functioning of Emirates Securities and Commodities Authority, and amendments thereof. This resolution sought to clarify and define specific terms about securities and commodities. It further aimed to explain the meaning the Securities and Commodities Authority Market and contributed about five articles for the clarity of this purpose. It alsopointed at categorizing and listing the authority's objectives and powers. It began with Article 7 of the resolution which involved the main aims and the purpose of the decision itself. Article 8 mentioned the skills which the authority possessed in the interest of working towards its target. This resolution further went on to define the organs of the body and its challenges. This part of the decision could be considered an extension of the previous section as it went on to state the functions of the authority. The last part of the decisionfocused on the administrative apparatus of the administration which primarily referred to its structural formation. This resolution consisted of thirty-six articles in all.

    Additionally, the fourthconsideration is based several decisions includingDecision of the Chairman of the Authority's Board of Directors Number (38/R) of 2015 concerning assigning H.E. Dr. Obaid Saif Al Zaabi as Acting Chief Executive Officer of the Securities and Commodities Authority. The Authority's Board of Directors' Decision Number (42) of 2015 concerning the Controls and Procedures for Reconciliation in Crimes related to Public Shareholding Companies. The decision of the Chairman of the Authority's Board of Directors Number (18 / R.M) of 2017 concerning the Rules of Acquisition and Merger of Public Shareholding Companies, and
Based on the requirements of the business interest.

    Annex number (1) of the decision is relevant to the technical requirements of the acquisition offer document. The first one is the financial and other information about the offer, the acquirer,and the target company. Further, the offer document and any amendments made to it after that must include a note in the introduction of the report concerned highlighting that the consultation of an independent financial consultant who is licensed by the authority is another requirement in case of any queries regarding such a document. Secondly, the parties must mention the publishing date as well as the name and address of the acquirer, and that of the person who submitted the report on behalf of the acquirer. Thirdly, details of the securities subject of the offer, indicating that the transfer should be with or without profits must be specified. The first three guidelines of Annex Number 1 are as follows:

    "The financial information and other information about the Offer, the Acquirer and the Target Company where the Offer Document and any amended offer Document must include the following:


              i.            A note in the introduction of the document indicating that consultation of an independent financial consultant licensed by the Authority, in case if there is any doubt about the Offer;

             ii.            The document publishing date, the name and address of the acquirer and the person who submitted the offer on behalf of the acquirer, if any;

           iii.            Details of the securities subject of the Offer, indicating that the transfer should be with or without the profits;

           iv.            The details about the total amount of the offershould also be submitted;

            v.            It must include the procedures that should be followed to accept the offer;

           vi.            The closing price of the securities to be acquired and the closing price of the offered securities (in case of acquisition through Swap) on the first day of every month of the six months immediately preceding the offerdocument's publishing date. And on the last day preceding the offerterm as well as on the previous day available before the offerdocument publishing date, provided that the parties obtain the prices of the listed securities from the market.In the event,the company has unregistered-securities, the information available on the number and value of the deals completed within the last six (6) months and disclosure ofthe source of such information,ornote shall be submitted to indicate that none of such information is available.

         vii.            The details of the first payment of the profits or fees in which shall be payable by the new securities (in case of acquisition through Swap). The classification of securities is profits, costs, the capital, and recovery, and a statement indicating the impact of accepting the offer on the money and the income earned for the shareholders of the Target Company. In case the new securities are not identical to the securities listed in the market, the offer Document shall contain all the details of the rights associated with the guards, and a statement indicating that an application was or will be submitted to the Authority to list them.

        viii.             Indicate the impact of accepting the entire offer on the Acquirer's assets, profits, and business which can be essential to conduct a valid appraisal of the Offer in case of an acquisition.

    The second subheading consists of a statement, the exact words of which must be included in the offer document and goes as follows:

    "The Securities and Commodities Authority and the Market shall not be liable for the content of this Offer Document and shall not submit any confirmation about the accuracy or completeness thereof, and at this moment expressly disclaim any responsibility for any loss arising from the content of this document or from relying on any part thereof."


    This decision also made specific, clear criteria if the payment of the offer value includes securities and in case the acquirer is a company not listed in the market. The following must be involved in the decision:

              i.            The sales, net profits or losses, before tax, if any, and after tax, the amount of paid fee, if any, and any exceptional items. Also, minority interests, and the total number of dividends, proceeds, and profits for each security, for the past three fiscal years.

             ii.            A list of the assets and liabilities based on the latest audited financial statements published.

           iii.            The cash flows, if they are available, based on the latest audited financial statements published.

           iv.            All the material changes to the Acquirer's financial or commercial position after the latest audited financial statements published, or a statement indicating that none of such changes took place.


            v.            The details relating to the items referred to in sub-clause Number (I/3/a) of this article regarding any initial announcement or initial financial statements issued since the publishing of the latest audited financial statements.

           vi.            Any information concerning any of the above that has been amended to take the impact of inflation into account.


         vii.            The significant accounting policies and any keynotes on the financial statements related to the adjustment of data, including any data that was amended to take the impact of inflation into account. If it is not possible to compare the data due to the change of the accounting policy, there should be disclosure of the estimated sum of the discrepancy arising from the difference shall be defined.

        viii.            The parties should mention names of the members of Acquirer's Board of Directors.


           ix.            The nature of the Acquirer's activity and the financial and commercial forecasts.

            x.            A summary of the main content of every material contract concluded by the Acquirer or any ofthe affiliates outside the ordinary course of its activity in the two years preceding the Offer Term. The summary shall include a note to the Related Parties, and the terms, date, and provisions of each contract, and any sums paid by the Acquirer (or any of its affiliates) or paid to it based on each deal. "

    The decision also sets out that all offer documents shall contain adequate information about the target company in compliance with the sub-clauses. The offer must also have information regarding the funding, the names of lenders and the source of funding. The decision highlights an essential part ofsection 8 where the decision points out towards the fact that all financial information regarding the disclosure of the offertransparently and efficiently. Importantly, the motive of the acquirer and an analysis of the profitability of the target company's share. 

    ]]>
    Mon, 14 May 2018 10:13:49 GMT
    <![CDATA[RAK Maritime Free zone Authority]]> COMPANY FORMATION IN RAK MARITIME CITY 

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

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

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

    The History

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

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

    What is different about RAKMC?

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

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

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

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

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

    Document Title

    Free Zone Establishment

    Free Zone Company

    Branch

    Application form

    Business Plan

     

     

    Letter of Intent

    Audited Financial report

     

    Company Profile

     

    Bank statement of past six months

     

     

    Letter of reference from bank

     

     

    Passport copies of shareholders

     

     

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

    NOC from sponsor

    Register certificate from parent company

     

    MOU and AOA of parent company

     

    Board Resolution of Parent Company

     

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

     

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

     

    Power of attorney, specimen signature and passport copy of secretary

     

     

    ]]>
    Tue, 24 Apr 2018 12:44:49 GMT
    <![CDATA[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.

     

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    Tue, 24 Apr 2018 12:15:07 GMT
    <![CDATA[Copyright and Apps]]> Ping!You got a Notification*

    "Internet is a place where nothing ever dies."

    A touch is all you need to show the world your piece of art and to be liked by the viewers. Facebook posts, Instagram new filters improving your images, Snapchat 10 seconds stories to score social kudos. Endless forms and invisible impact.But the legal implication of copyright infringements on social media is more than what it was ever imagined. It's a tug of war between social media companies and the artists gaining new income by getting "Viral" or reaching millions of followers. In a continuous struggle of influencing the audience, the line of copyright infringement seems hazy and unclear. In this article, I will try to draw the line for our readers to make them understand the legal implications of stealing social media content.

    The variety of content that is shared online is strictly considered as an artistic work, to which intellectual property law applies. Copyright- the right of the author over his artistic or literary work and the right to allow others to use his copyrighted work. In terms of social media images, the copyright generates once the image is posted online. The statue of Anne is the first to receive copyright protection, since then a lot of significant changes have been made concerning the copyright protection and nowadays Berne International Convention protects copyrighted work since 1971. However, we can now witness the recent copyright protection given to digital content by World Intellectual Property Organization (WIPO). The WIPO treaty signed by almost all countries is the first treaty to address the issue of digital environment and its infringement.

    Social media websites stipulate terms of use that a user must strictly comply to in order to use the service, which we clearly don't read, therefore having anyinformation about what we have signed for and are bound by the terms which we didn't even read or understand.

    Thus, through this article, we will try to explore the unreconciled stress between the freedom to use and protection of copyright holders. The sole reason to write this article is to increase awareness among social media users and to provide a legal backdrop for discussion.

    My Image, My Right!

    New York Instagram Sensation Richard Prince reminded us that a normal picture you took at the beach, shared publicly on Instagram can be reused and sold for a price not less than USD 90,000. In New York Freeze Art Fair, Prince displayed giant screenshots of Instagram users without any prior permission and sold for a good price. So here is what he was doing, since, 1970 prince has been "re-photographing" images from magazines, books or advertisements. But, in 2008 Patrick Cariou filed a case against Richard prince[i]when he re-photographed Cariou's image. The court of thefirst instance passed the judgment in Carious' favor, however, when the case went for appeal, the court ruled out the lower's court judgment in part and held that Prince's artworks make fair use of defense and he has not infringed any copyright because his work was "transformative."

    It is important for all the users to know whether if a third person is using their content from their profile, the principle of "fair dealing" may protect their usage as what happened in Prince's case. The principle outlays numerous exceptions where the third party can utilize the copyrighted content without the author's permission such as:

  • for critic or review;
  • for research work;
  • for making parody;
  • for news;
  • For legal advice.
  • A careful look into Instagram terms of use, we understand that the photographer owns an exclusive right to use, sell the image and can enforce their copyright against anyone who infringes upon your rights.The terms of use come into effect the moment a picture is uploaded on Instagram. It provides a fully-paid, freely transferable social networking stage to utilize the content in the way the user desire. It further implies that Instagram permits pictures from the site to others- including other Instagram users who can report pictures without encroaching on other's copyright.

    Don't take a Screenshot

    The United Kingdom Digital and Economy Minister recently restricted people to take screenshots of Snapchat stories. He publicly mentioned that "under UK Copyright law, it is unlawful for Snapchat users to copy or take a screenshot of theimage and share it in the public domain without the sender's prior consent". Let's validate his statement by looking into UK Copyright law. TheArticle 96 of UK Copyright, Designs and Patent Act 1988, allows the copyright owner to file a suit against the third party and can seek all such relief by way of damages, injunctions, accounts or otherwise.

    Snapchat claims that they follow a strict privacy policy, where it states that it does not condone any type of copyright infringement and if users suspect that their rights are being infringed, they have the right to report the incident to the company. However, the policy isn't that strict due to several reasons, the policy does not mention anything about removing the users who they believe are infringing copyright laws, or they can delete the provision of screenshot altogether.

    Copyright V. Social Media- the Case studies

    The widespread of regular practice of sharing photographs and other content has led to uncertainty regarding the ownership of those images and the violation of copyright law. This back and forth exchange of social media content has created a world where content is freely posted and viewed without any costs or charges. Thus, the free online culture created material conflicts with regards to control over reproduction and distribution. The rapid reproduction of original content has prompted several copyright infringement legal issues in past years.

    In all of these cases, the third party contends the usage being a fair use as set out in laws of almost all the countries such as 17 U.S.C § 107.  A recent case of North Jersey Media Group, Inc. v. Pirro[ii], where Pirro publish a photograph which was copyrighted work of Thomas E. Franklin of North Jersey Media Group Inc. (NJMG) on Facebook. NJMG got that image registered with U.S. Copyright Office. However, on account of Pirro Fox news Pirro combined that image with another and posted the same on that account. NJMG filed a copyright infringement suit against Fox News and as usual Fox News soughed defense under fair use. The Southern District Court of New York rejected Fox's defense and held that merely adding a "Hashtag" and making small alterations to the image is not sufficient. In other words, the image failed to create a new insight and understanding for the audience and cannot claim warrant protection under fair use.

    The case was referred for appeal and Fox appealed to the court for "Context-Sensitive Test" and argued that social media platform is a community to share ideas and this environment is in itself a transformative expression. Also, denying social media users the right to fair use will curtail their right of expression. But, unfortunately, the thought stands still as the parties resolved the matter amicably before the court.

    A similar case was filed by a photographer Kai Eiselein, where he filed the case against BuzzFeed for infringement of his copyright for an image he posted on Flickr[iii]. BuzzFeed uses his image in an article without his permission and the issue regarding fair use principle remain unanswered in this case as well.

    These cases have the ability to highlight the potential difficulty when thelaw tries to balance the copyright owner's right and the freedom of expression of social media users.

    UAE is at par with other countries and imposes stricter punishments for copyright offenders of social media content, as recently a case has been filed against a teenage girl who posted a picture of her friend without taking her or her family's permission on one social media website. The parents of the girl filed a case against her for posting their daughters photograph. The defendant girl argued that she posted the picture with her friend's consent. However, upon discovering the truth the family tried to take down the case and court rejected for reconciliation considering theseriousness of electronic crimes in the country.

    The case went to thecourt of thefirst instance, where defendant girl failed to prove the consent given to her for posting such picture and was held liable for the crime and was sentenced under Article 378 of UAE Penal code for violating someone's privacy. The case is now presented in the court of appeal, and the judgment is still pending. However, any copyright infringement cases in this regard are yet to come in public domain. It is an established fact that UAE laws are stricter when it comes to assault to privacy or electronic crimes and law provides strict punishments for the offender irrespective of the age and nationality.

    #New Era New Needs

    Keeping in mind the pace of technological advancements around the globe and the social media content countries are either making amendments in the prevailing law or implementing new law for protecting the rights of copyright owners for content on social media websites.

    The Digital Millennium Copyright Act (DMCA) of United States provides a mechanism for owners of thecopyright to protect their social media content. Under the law, the copyright holder holds a right to notify the Internet Service Provider(ISP) or the Online Service Provider (OSP), once he becomes aware of the infringement. Also, the ISP allows the copyright holders to request for removal of the content, as under Section 512 of DMCA, ISP must remove the copyrighted work post receiving the notification from thecopyright holder.

    European countries were the first to sign the Berne Convention for protection of Literary and Artistic Works. Additionally, copyright law in Europe is implemented through directives- the legislative acts of European Union. Since the European Union follows common law and others civil law, there is no specific approach for all and the Intellectual Property directives provide the rules for regulating online content and their copyright issues.

    In 2010, United Kingdom passed Digital Economy Act (DEA) for protecting and regulating online content on social media websites. DEA provides exclusive power to the government to limit and/or terminate internet services to copyright infringers. Alike, U.S. the DEA requires holders of copyright to inform the potential infringement of their rights.

    UAE Cyber Crimes Law promulgated by Federal Law Number 5 of 2012 (the Cybercrime Law)penalizes the offenders of privacy on theinternet including the social media websites. UAE Penal Code implemented under Federal Law Number 3 of 1980 punishes the offender who transmits someone else's pictures without their prior consent and requires the defendant to prove beyond reasonable doubt the presence of consent. Also, the Federal Law Number 7 of 2012 concerning the Copyright Law prohibits the users to share any picture of thethird party without their consent. UAE government has also passed several guidelines for public as well as governmental authorities for social media usage such as, in 2011 UAE government passed certain Guidelines for Social Media Usage for UAE government entities, also Telecommunications Regulatory Authority (TRA) passed guidelines for public at large

    It's time for the international law to cross the international territorial boundaries like the international reach of this social media content. Country-specific laws protecting online content will no longer be able to protect the author's work. Due to rapid change in the technology, the need of the hour is international treaties and laws for protecting the digital content of a copyright holder sitting in different part of the world.

    Before I Sign out

    In this era of technology, the copyright and other laws are blurry and are insufficient to protect the online users completely. The law is required to adjust itself quickly to frame some guidelines accepted worldwide. Under any copyright law, ignorance is never an excuse. Therefore, a copyright infringement without actually knowing its original owner is an infringement. The only remedy available with the copyright holder is to get the content removed, especially in the cases where the contents are used commercially. So, clear your doubts and know your legal rights before sharing your personal life on social media.  


    [i]Patrick Cariou v. Richard Prince 714 F.3d 694 (2013)

    [ii]74 F. Supp. 3d 605 (S.D.N.Y 2015)

    [iii]Eiselein v. BuzzFeed, Inc No. 13-13910 (SDNY June 2013) 

     

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    Tue, 24 Apr 2018 11:45:10 GMT
    <![CDATA[Liability of Aircraft Operators]]> LIABILITY OF AIRCRAFT OPERATORS

    On 15July 2009,New York city witnessed a 'Miracle on the Hudson River' when flight 1549 departed New York but shortly after the take-offdue to bird strike the plane lost its two turbines.The Senior Captain Chesley 'Sully'Sullenberger was told to return to the airport, but Sully, decided that the plane wouldn't reach to the airport and landed an Airbus A230 with 155 passengers on the Hudson River and saved every passenger including the crew members. Sully was heralded by public and media at large for his remarkable accomplishment but simultaneously, he was under serious investigation from National Transportation Safety Board (the NTSB) in theUnited States,who revealed that theaircraft could have made it to the airport. Sully maintained his position stating that if they would have tried to land at the airport, the plane would have crashed.

    But let's tweak the situation here a little bit or preferably the whole of it, what if while trying to land at the airport, the plane crashed in between and there was severe damage to the ground as well as the lives of the passengers. Now, who is to be held responsible for asituation like this? Is the operator of the airplane or the owner/ lessor/financier? Similarly, who will decide the liability and how much? Let us read the article further to find out who's liable for what?

    Piercing the Liability Ceiling

    The aviation industry has become an ordinary to an extraordinary industry since a decade and a half. Amid this timeinterval, it is an established fact that there are privileges and liabilities attached to the airplane. Also, there are several parties involved in an aircraft such as the owner, the lessor, the financier and the operator. However, our main question is who is liable for the damage so inflicted by the airplane he owned or he was operating. It generally depends upon the theory of liability adopted by the country where the damage was caused.

    Categorically, we can divide the liability theory into two broad categories; absolute liability and rules of torts and negligence. The idea of absolute liability of owner and operators of the aircraft for ground damage is an outcome from three bases which is applicable in common law countries. Primarily, absolute liability is imposed considering the innocent parties' exposure to such danger. Secondly, the benefit arising from such activity that the aircraft owner derives from and the sheer helplessness of the ground victim arises absolute liability. Thirdly, the absolute liability will be imposed if the enterprise has the potential to distribute the loses the way they distribute benefits.

    The countries who do not impose absolute liability through legislation or by way of precedents apply the rules of law of torts. The main principle applicable in cases of defining liability, the legal maxim Res Ipsa Loquitorplay a critical role. The rule places its basis on the theory that the defendant having the control over the situation which caused damage, has the best view of determining the reason for such injury and the other party has the right to prove his negligence. In modern times, the maxim is used in aircrafts accidents such as in Kadylak v. O' Brien[i]where an airplane whilst doing a forced landing killed a boy. The court established that the claimant has to prove accused's negligence prior to sorting any recovery for the death and since the aircraft operator had the control over instrumentality he has the burden of proving his freedom from fault. Additionally, there are cases where the legal maxim can be rejected in several cases such as:

  • Where party failed to prove that aircraft operator had exclusive control;
  • It is unusual occurrence for an airplane to crash without human intervention;
  • Failed to prove operator's negligence.
  • Considering the involvement of several parties in the aircraft such as the operator, owner/lessor or financier, the liability of each of them differs with their position and the control over the aircraft. The liability of each party is outlined as follows:

  • Liability of aircraft operator
  • Each treaty makes operators liable for death, substantial damage and mental damage (just compensable if credited explicitly to the harm via airplane and confirm by manifestations of an unmistakable mental disease), and in addition natural and property harm. No recuperation is taken into account correctional, model or non-compensatory harms. Operator obligation limits extend from 750,000 Special Drawing Rights (SDRs)(6) for an airplane measuring 500 kilograms (kg) to 700,000kg, to 7 billion SDRs for an airship weighing 500,000kg, per occasion. On the off chance that two unique operators caused the harm, they are together liable.  Also, under several cases such as Air Transport Associates Inc. V. United States[ii] and Northwest Airlines V. Alaska Airlines[iii], the court invalidated the use of agreement purporting to dissolve the liability of the aircraft operator for the aircraft accidents caused by the operator due to his negligence. The court further mentioned that such an agreement is against the public policy as it has the indemnity clause which can set aside the liability of the operator even if he was negligent in his duty.

  • Liability of owner, lessor,and financers
  • The liability for harm to property and for injuries caused via airplane contact with the earth's surface has been a matter of litigation. Regardless of whether the owner of the airplane has any obligation towards the occupants on the ground for the harms dispensed by a plane that he claims, relies on the hypothesis of risk that is embraced in the specific state where the plane causes the damage. Every country has the different set of rules for deciding the liability of the owner, lessor or financers for the damage caused to the third party.For example, in the U.S. a lessor, owner or financer is liable for the damage caused to the land and the innocent third party only in cases where the civil aircraft, the aircraft engine was completely in possession of the lessor or owner. Also, the damage was caused due to the aircraft or the engine. §44112 is applied to U.S. registered civil aircrafts of lease for more than 30 days.

    Lately, world occasions and financial conditions have constrained organizations that own, lease or finance the aircraft to inspect their risk if the owner of the aircraft is associated with a mischance or terrorist act, especially a calamitous one. Many loaning establishments, out of the blue, possess aircraft through repossessions or exercises that swapped obligation for value. These organizations end up worrying about the bona fides, capacity and general fortunes of the operators of the aircraft, also the litigation that takes after flight fiascos. While painstakingly drafted protection arrangements have been esteemed "satisfactory" to cover the obligation, the utilization of airplane as weapons of mass pulverization has caused a re-assessment of risk issues.

  • Liability for ground damage
  • In the Ground Damage Convention as far as possible are appropriate just if the operator can demonstrate that (I) it was not careless and did not act wrongfully, or (ii) the demonstration of someone else caused the harm. Regardless, the operator bears the weight of verification to demonstrate that it was not to blame. Under the Unlawful Interference Convention, if the aggregate harms for an occasion surpass the cutoff points put forward in that (counting extra pay from the reserve, as portrayed underneath), the weight of verification rests with the casualty, who must demonstrate that the operator added to the event of the occasion with the goal to cause harm, or acted heedlessly and with information that harm would most likely outcome. Regardless of whether it is resolved that the harm comes about because of the activities of a representative of the operator, the operator can in any case dodge extra obligation by demonstrating that it is possible that it had a fitting framework for choice and checking of workers set up, or that it acted in consistency with security prerequisites under the Chicago Convention.

    UAE and Aviation

    The UAE has signed the Montreal Convention 1999 (theConvention), which thus is authorized by UAE by virtue of Federal Decree No. 13 of 2000 Ratifying the Convention for the Unification of Certain Rules for International Carriage via Air (Montreal Convention 1999) (the Federal Decree). It has been in compelling in the UAE since 4 November 2003. The Convention applies to all instances of worldwide carriage of people, stuff or freight performed by an airplane for remunerating, with acarriage having its starting point and goal in two diverse contracting states or a solitary state with round trek carriage with a concurred halting spot in another state. On account of mishaps, real damage or demise on an aircraft, the pertinent arrangement which is to be taken into consideration under Article 17of theConvention which gives that 'the carrier is at liable for harm supported if there should arise an occurrence of death or substantial damage of a traveller upon condition just that the mischance which caused the passing or damage occurred on load up the airplane or over the span of any of the operations of leaving or landing.

    The General Civil Aviation Authority (the GCAA) in UAE is the authority concerned for the Aviation sector in the nation. Also, the Civil Aviation Regulation Part VI- Chapter 3 concerning Air Accidents and Incidents Investigations (the CAR part VI). Under CAR part VI Air Accident Investigation Sector (the AAIS) will be established as a unit of GCAA in order to perform the investigations in air accidents or selected incidents. However, any investigation made by AAIS will not be used for any judicial or administrative proceedings for imposing liability on the aircraft operator or owner.

    Defences

    The selection of similar normal standards of torts for damage caused via aircraft, as are pertinent ashore, furnishes the litigant aircraftowner with similar protections that are allowed in traditional tort circumstances. The defendant has a far more prominent capacity to keep up a resistance in these jurisdictions than he would have in ajurisdiction that authorizesliability, on the grounds that in these purviews the defendant has no protection with the exception of contributory negligence by the plaintiff. Negligence does not need to be appeared to make the defendant at risk for all harms.

  • Act of God
  • A demonstration of God is a legitimate protection to an air crash negligence where the common principles of land torts have been received. In Johnson v. Western Air Express Corp., it was held that the calamity happened due to the irregular powers of nature and that it couldn't have been sensibly foreseen, made preparations for, or stood up to. The defendant's airline enterprise was hence not dependable. This is rather than Prentiss v. National Airlineswhere the court in an outright risk state would not engage the safeguard of demonstration of God.

     

  • Bailment
  • In states where the ordinary rules relevant for torts represent the obligation of owners, lessees, or operators of airplane, the way that the proprietor of the flying machine leased or lent the airplane to another does not make the owner subject for damages if there should arise an occurrence of bailment where he has not been careless.Only if the owner was negligent himself or if there was an agency relationship can be held at risk for ground harm caused by the pilot. The essential case ofan aircraft bailment is Boyd v. White.For this situation, which emerged in an expression that applies similar guidelines of tort for the aircraft obligation with respect to customary tort activities, the owner leased the plane to a flying instructor knowing it would be flown by an understudy pilot. The student pilot and the teacher were held subject to the ground harm caused by the careless operation of theplane yet the court confirmed the nonsuit for the respondent plane owner.

     

    International status

    The Rome Convention, marked in 1952, addresses rights of thethird party which experienced harm and damages from anevent involving the aircraft. Similar to the treaties the addresses liability for traveler damage, the Rome Convention built up operator liability limits for harm caused on the ground. The size of the airplane decides the points of confinement founded. Nonetheless, the Rome Convention never got across the board acceptance. The Ground Damage Convention tries to modernize and supersede the Rome Convention. It accommodates strict obligation of operators to remunerate casualties of harm on the ground from aircraft going on aninternational route, other than because of a demonstration of unlawful obstruction, in a nation that has signed the Convention.

    Conclusion

    While no lease, or treaty, can completely assurethe owner/lessor/operator of an airplane that a claim won't be affirmed against it. The courts are yet to witness cases where the owner/lessor or operator will be solely held liable for their negligent act.


    [i]1941 U.S. Av. R. 8

    [ii] 221 F.2d 467 (9th Cir 1955)

    [iii] 351 F.2d 253 (9th Cir 1965)

     

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    Fri, 30 Mar 2018 00:00:00 GMT
    <![CDATA[Понимание избежания налогов против уклонения от уплаты налогов]]> The Fine (and Hazy) Line between Tax Avoidance and Tax Evasion

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

                                                                           -       Denis Healey

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

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

    Drawing the Line

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

    Tax Evasion

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

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

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

    Tax Avoidance

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

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

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

    UAE battle against tax evasion

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

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

    Conclusion

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

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    Mon, 19 Feb 2018 01:59:00 GMT
    <![CDATA[Франчайзинг в ОАЭ]]>    Liability of Franchisors

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

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

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

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

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

    Registered Agreements

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

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

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

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

    In the USA

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

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

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

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

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

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

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

    In the UAE

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

    UAE Civil Code

    Article 282

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

    Article 313

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

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

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

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


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

     

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

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

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

    Erstwhile Legal Regime

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

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

    Salient Features

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

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

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

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

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

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

    Suspension of Criminal Proceedings for Dishonored Cheques

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

    Interested Parties

    If you are a debtor:

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

    If you are a creditor:

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

    Liability of the Directors

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

    Effect and Impact

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

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

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

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

    [i] Federal Law Number 2 of 2015

    [ii] Dubai International Financial Centre

    [iii] Abu Dhabi Global Markets

     

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

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

    - Charles Darwin

    Introduction

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

    Started From the Bottom; Now, We Are Here

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

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

    What's new?

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

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

    Dispute Resolution Mechanism

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

    Evolution, Not Revolution

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

           i.          Scope of improvement

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

          ii.          Cost

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

         iii.          Harmonious system for resolving dispute

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

        iv.       Payment Mechanism

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

        v.        Building Information Modelling (BIM)

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

        vi.          Confidentiality Clause

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

    GCC welcoming NEC4

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

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

      ]]>
    Sat, 30 Dec 2017 03:00:00 GMT
    <![CDATA[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[Ипотека движимых активов в Дубае и ОАЭ]]> Mortgage of Movable Assets

    The enactment of UAE Federal Law Number 20 of 2016 Concerning Mortgaging of Movable Properties as Security for Debts (the New Law) is a milestone towards the UAE government's initiative to bring positive changes in UAE's mortgage law. In parallel to the recent laws on commercial companies and on bankruptcy, the New Law endeavors to provide for a more certain and conducive financial regime in the UAE. The New Law bridges the gap and may result in providing business opportunity to avail of financing and lenders to safeguard their interest by a secured form of security. 

    The pivotal change that the New Law contributes to is the ability to create a pledge over moveable assets without the need to transfer the possession to the mortgagee or an alternate third party. The law preceding this one required mortgagors to transfer the possession of assets in favor of the mortgagee. The restricted the mortgagor from gaining beneficial interest from the property, consequently restricting the owner or obligor from repaying the amount of the loan. The New Law, therefore, rids of this hindrance and allows for mortgages to be created over movable property without the need to transfer possession from the mortgagor to the mortgagee.

    What constitutes assets?

    Article 3 of the New Law specifies movable assets that can be mortgaged (pledged) to include deposits in banks, raw goods and products, tools and equipment, and more. Article 2 more particularly provides that the New Law shall apply to any civil and commercial transactions that create a right of to pledge over movable assets by the provisions of the New Law.

    Security Register

    Article 10 of the New Law has laid down the conditions of registering a mortgage. A security interest by way of mortgage may only be created and affected by movable property in favor of third parties if it has been registered in the Register. Currently, the process of registration is unclear and more details on the matter is pending until the release of a Cabinet Resolution establishing the Security Registry. Further, Article 10(2) clarifies that once a mortgage right has been created on a mortgaged property and was declared according to the provisions of the New Law, no subsequent mortgage right may be created on the same mortgaged property unless through declaration thereof. This provision, along with Article 17, permits registration of ranking charges on the Security Registry. This priority in the ranking shall be determined by the date and time of registration of the pledge in the Security Registry.

    Another reason where the New Law benefits over the old regime is on account of the New Law allowing for future property to also be secured by creating mortgage over it. This move is applauded by lenders who have added comfort at the time of extending security to the obligors.

    Enforcement

    The process of registration is also a required precedent for the enforcement of the mortgage right. The provisions of the New Law have stated that the legality and application of the right specifically towards third parties must follow the Register's receipt of the registration. Following the enforcement of the rights, the mortgagee is allowed to surpass other creditors in obtaining the rights to the property.

    Process of Sale

  • There are conditions to the sale procedures of the mortgaged property that specifically Article 33 of the New Law clarifies. The provisions state that:
  • The Court may authorize the mortgagee to sell the mortgaged property after fulfilling the following conditions: (i) he obtains the issuance of the order permitting him to seize and execute against the mortgaged property and (ii) he acts with sufficient care for the sale thereof at a price not lower than the market price without following any of the sale procedures set forth in the Civil Procedure Law.
  • The Court may, if it finds it necessary to preserve the value of the mortgaged property, specify in the order permitting the mortgagee to seize and execute against the mortgaged property, the conditions of the sale method or may decide the sale method and determine a minimum limit of the sale price to be specified according to the market price.
  • The Court may rule to allow the mortgagor to sell the mortgaged property if it was proved that he could sell it at a higher price, within the period specified by the Court and under the guidance of the mortgagee or the Court.
  • If the Court allows the mortgagee to sell the mortgaged property, he shall declare the Court's decision in the Register five working days before the date specified for sale. Otherwise, it shall be considered void, provided that the declaration includes the following: -
    • Name and address of the mortgagee;
    • Names and addresses of the mortgagor and principal debtor;
    • Description of the mortgaged property to be sold;
    • Sale method;
    • Date, time and place of sale.

    Given this, the Article ends on the note that the mortgagee may be granted the permission to immediately sell a mortgaged property that has been exposed to destruction, damage or depreciation or if the mortgagor fails to provide a substitute for the great expenses that may incur.

    Conclusion

    The financial regime of a nation is vital for its growth and its economic development. The new mortgage law passed by the UAE lawmakers not only rids of the hindrance imposed on the mortgagors to deliver the possession but also places the present and future property on an equal footing.  In the wake of this new development, all the parties involved in the process of lending should be aware of the legalities surrounding mortgage and pledge of movable assets to ensure their compliance with the New Law.  

     

    ]]>
    Sat, 18 Nov 2017 12:00:00 GMT
    <![CDATA[Маркетинг иностранных фондов в ОАЭ]]> Marketing Foreign Funds in the UAE

    "There are two times in a man's life when he shouldn't speculate: when he can't afford it and when he can."

    – Mark Twain

    The world of financial markets and investments often induce reserved and divergent responses from the common man. Investing options are often complex due to the regulatory ambiguities of the respective jurisdictions. Therefore, there is a constant need for imparting knowledge and advice, as well as increasing the visibility of such investment products to reduce the intricate and intimidating stigma attached to them. While markets may change for good or for worse, good investing advice will always be beneficial no matter the circumstance.

    In a bid to streamline and structure the promotion of foreign funds in UAE, the UAE securities regulator, the Securities and Commodities Authority (SCA) revised the past mutual funds regulation and amendments made thereto (Old Regulations){C}{C}[i]{C}{C} by enacting the Board of Directors' Chairman Decision No. 9/R.M of 2016 (MF Regulations). Further, SCA enacted the Promotion and Introduction Regulations (P&I Regulations){C}{C}[ii], which acts alongside with the MF Regulations to govern the management of mutual and investment funds. This article purports to highlight the pertinent revisions made to the regime of marketing and promotion of foreign funds in the UAE through the implementation of the MF Regulations. 

    Essentially, the revisions made under the MF Regulations have a substantial impact on the promotion of foreign funds that in the UAE, due to the elimination or limitation of the exclusions of such funds. Under the MF Regulations, the scope of promotion and marketing of a foreign fund has been stated in Article 35 of the said regulations and provides inter alia that no foreign mutual fund shall be promoted within the UAE unless it is registered with SCA and distributed by a locally licensed promoter.{C}{C}[iii]{C}{C} In such cases, the legal representative of the foreign fund must submit an application to the SCA to register the foreign fund on along with supporting documents and statements and enclosed with the prospectus and investment policy of the foreign fund.{C}{C}[iv]{C}{C} If approved, such registration remains valid for a year and will expire on December each year. Further, it should also be renewed before at least one month of expiry.{C}{C}[v]

    However, the aforesaid requirements for SCA registration of the foreign fund and contract with a license local promoter shall be exempted in the below circumstances:

    • reverse promotion or solicitation - when an investor in the UAE initiated the promotion or has offered to buy foreign funds and such promotion is not at the instance of the foreign issuer or its promoter or distributor, provided relevant documentation can substantiate this reverse promotion or solicitation.[i]
    • when the foreign fund is promoted to federal or local governmental agencies or their wholly owned companies.[ii]

    For the purpose of the MF Regulations, foreign fund means a mutual fund established out of the UAE or in a (financial or otherwise) free zone within UAE. Prudently, the foreign fund and/or its agents must maintain and retain records and documents towards substantiating reverse solicitations to show evidence that there indeed was a reverse solicitation. As a welcome change, reverse solicitation has been added as an exclusion or exemption for SCA to undertake promotion and marketing of foreign funds.

    P&I Regulation

    Further, the provisions of P&I Regulations compliment the scope of MF Regulations regarding the marketing of foreign funds within mainland UAE. The P&I Regulations follow the same premise that promotion of any foreign domiciled fund in the UAE will require registration with the SCA.

    For the purpose of this P&I Regulation, the term promotion means and includes the marketing, distributing advertising, and publication of any data, information, or promotional material related to financial products. Further, foreign securities or foreign funds mean and include stocks, bonds, Sukuk, units of investment funds, commodities, contracts, derivatives, and other securities or financial instruments issued by foreign issuers.

    However, similar to MF Regulations, the P&I Regulations contain exclusions from SCA's registration requirement, which is set out below:

  • Promoting foreign funds to Qualified Investors other than a natural person with financial solvency (Article 2(3)(c)). This means that the foreign fund would require SCA registration and license to promote and market the funds in case of individual investors only.
  • As mentioned above, in reverse promotion or solicitation, where the promotion is initiated by an investor in the UAE who is interested or has offered to buy foreign funds and such promotion is not at the instance of the foreign issuer or its promoter or distributor as long as requisite documents can substantiate the same (Article 2(3)(e))
  • In case the financial products are listed in any market (Article 2(3)(b)). However, under the P&I Regulations, a Market{C}{C}[i] defined as SCA licensed UAE exchange, thereby limiting the applicability of the exclusion to funds and securities listed in UAE.
  • Given the above and for the purpose of the P&I Regulations, more particularly the above exclusions, Qualified Investor[i] is:

              I.        {C}{C}an investor capable of managing its investments including:-

  • the federal government and local governments, governmental corporations, and authorities or their wholly owned subsidiaries;
  • international commissions and organizations;
  • persons licensed to engage in business in the UAE provided that one of the activities of the entity is investing; and
  • a natural person who is solvent with a yearly income of at least AED 1,000,000 (UAE Dirhams one million) or equity or assets, excluding the main residence, of at least AED 5,000,000 (UAE Dirham five million) and declares that he has adequate knowledge and experience to assess the prospectus and the advantages and risks associated with the investment; and
  •  

         II.        any investor represented by an investment manager licensed by the SCA.

    Further, a foreign issuer has to adhere to the provisions relating to the promotion of foreign funds set out in Article 12 of the P&I Regulations and provisions regarding both, public offers and private placements of foreign funds. The P&I Regulations has stringent stipulations regarding Public offers of foreign funds[i] that can only be made by funds established outside the UAE or in a UAE free zone (financial or otherwise). However, these funds should be regulated by a governing authority similar to the SCA and should be permitted or licensed in the home jurisdiction for making a public offer. Similarly, the P&I Regulation also sets out conditions to be met for a private placement of foreign funds exclusively made to Qualified Investors (Article 12(2)). However, as explained above, since the exclusion or exemption for registration requirement is only limited to Qualified Investors who are not natural persons, this effectively means that private placements of foreign funds to Qualified Investors as envisaged under article 12 of the P&I Regulations would be limited to individual investors. Another pertinent stipulation to be considered while promoting an SCA licensed foreign fund is that the minimum subscription by an investor in such foreign fund established in a free zone or a financial free zone must be at least of AED 500,000 or AED 1,000,000 (Article 12(14)).

    Applicability of the MF Regulations and P&I Regulations on the financial free zones

    As mentioned above, the requirements and conditions under the MF Regulations and P&I Regulations shall also apply to firms located in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global market (ADGM), if they wish to pursue investors in UAE.

    In contrast, the aspect of marketing of foreign funds within ADGM and DIFC financial free zones are subject to respective laws and regulations followed by each zone. As a result, marketing of foreign funds in the ADGM may fall under one or more of these regulated activities depending on the exact method of marketing employed.

    Conclusion

    Therefore, if a foreign issuer wishes to market the foreign fund within the UAE and does not fall under the exclusion or exemption under the MF Regulations or the P&I Regulation, then the foreign fund needs to be registered with SCA and distributed by an SCA licensed local promoter. In any event, foreign funds are free to undertake any promotion and marketing of its interest outside of UAE mainland. The new regulations have extended the legalities involved in the promotion and marketing of foreign investors to secure the interests of the parties in the transaction. Having said that, both MF Regulations and P&I Regulations are at a developing stage, and SCA may periodically issue further directives or regulations for providing clarifications to ensure ease of undertaking the promotion and marketing of foreign funds within UAE.


    [i] Article 12(1) of the P&I Regulations

    [i] Article 1 of the P&I Regulations

    [i] Article 2(3)(c) of the MF Regulations

    [ii] Article 2(3)(c) of the MF Regulations

    [i] Board of Directors Resolution No. 37 of 2012 and amended by way of the Board of Directors Resolution No. 13 of 2013

    [ii] Chairman Resolution No. 3/R.M of 2017 which came into and came into force on 1 February 2017

    [iii] Article 35(1) of the MF Regulations

    [iv] Article 35(2) of the MF Regulations

    [v] Article 35(3) & 35(4) of the MF Regulations

     

    ]]>
    Sun, 29 Oct 2017 12:00:00 GMT
    <![CDATA[Project Finance - Вопросы и ответы - Практическое руководство - ОАЭ]]> Project Finance – Q&A – Practical Guide - UAE

    What are the key difference in the legislation in the UAE and other key international jurisdiction?

    In comparison with other jurisdictions, the laws regulating the project financing in UAE are not too strong. The Federal Law Number 18 of 1993 concerning the Commercial Transactions Law (the commercial law) and the Federal Law Number 5 of 1985 concerning Civil Code (the civil code) governs the project finance in the country. However, these laws are not at par and are in comparison with other major countries are not too detailed. Further, concerning the civil code and the commercial code, the following are the main transactions which are not regulated by security laws of UAE:

  • The first and the principal difference in UAE and other jurisdictions is the lack of a concept of floating charges, the security law in UAE do not recognize the creation of security interest, either by mortgage or through the pledge. The security interest can only be created for assets that can be identified and ascertained.
  • In several jurisdictions, the court or the relevant government authority of that country requires them to register a mortgage over a movable property to allow for filling financing documents. However, UAE does not need parties to record for pledges over the movable property.
  • The UAE imposes a mandatory requirement on the parties to register the mortgage at Lands Department in the relevant Emirate and depositing documents of title in the bank is not sufficient.
  • In other jurisdictions, the assignor, and assignee enters into an assignment to notify the assignment debtor, however, under UAE law debtor's consent is required for that particular assignment to be created.
  • Are there differences in the way project finance operates in the free zones and secondary jurisdictions?

    Yes,  there are variations in the operation of project financing in free zones and other jurisdiction since the free zone is in itself a separate jurisdiction in UAE. Henceforth, all the free zones have their own rules and regulations governing the project finance. The first difference that in most of the free zone the mortgages over land is not possible, however, the Jebel Ali Free Zone (JAFZA) passed Law Number 1 of 2002 concerning the lease of immovable property in JAFZA which allows for a mortgage over a building but still not over a land.

    Within UAE, different Emirates have promulgated their local laws which govern the mortgage and pledge apart from the commercial code and the civil code. The Emirate of Dubai has implemented its own real estate law, Dubai Law Number 13 of 2008 concerning the Interim Real-Estate Register, this law conforms with the UAE laws to facilitate the registration of a security interest in the land.

    It is advisable to operate in the free zones rather than the mainland because of the ownership restriction in the mainland. The foreign investors can enjoy hundred (100) percent ownership in the free zone as opposed to forty-nine (49) percent in the mainland.

     Do Islamic finance concepts impact the way the project finance is structured?

    Islamic finance concepts do not impact the way project finance is structured in the UAE. Most project financings are done through conventional financing methods and instruments, such as lending streams. On the other hand, Islamic finance techniques should comply with the prohibition of charging interest as per Shariah Law. This does not mean that Shariah prohibits making profits, but rather it promotes the idea that making profits as charging interest is harmful to borrowers. Although there is a lack of effort by the financier, they will still enjoy profits. Given that customers are looking for new funding sources, the mixture of Islamic finance concepts and conventional methods are becoming more common in the United Arab Emirates' market.

    What types of collateral can be used?

    The laws governing securities in the United Arab Emirates differ from those in Common Law jurisdictions. In the United Arab Emirates, floating charges does not exist, and there is no requirement for registration for pledges of movable property, and no mortgages can be created by mere deposit of title deeds. In the United Arab Emirates, the most common securities include assignments over contracts and receivables, property mortgages and pledges over moveables, shares and bank accounts. Assignments over contracts and receivables, which involve the transfer of rights from one person to another, are used as securities for financing agreements. As for pledges of shares and bank accounts, companies can pledge their shares with lenders by providing the shares in exchange for loans from banks. Federal Law Number 20 of 2016 has allowed product stocks to be securitized which has brought more security to financing transactions. The Central Bank of UAE and the Securities and Commodities Authority (SCA) regulate securities in the United Arab Emirates.

    How do creditors assure themselves?

    Under the United Arab Emirates' regulations, there are very few to no remedies that allow a creditor to assure themselves: creditors will have to obtain court orders to auction assets as they cannot take possession of them. Ensuring repayments can be made should be the creditor's top concern when agreeing. Federal Law Number 20 of 2016 on the pledge of movables as security for debts is bringing more security to financing transactions as credit balances, and commodity stocks can now be securitized. The law also aims to reduce the multiple undeclared pledges through an updated registration process.

    Outside bankruptcy/ insolvency procedures, how can a project lender enforce their rights as a secured creditor?

    The lender of the project is expected to be involved in the project more closely. There is one self-help through which the project lender can enforce their rights is by discussing their interest with the relevant stakeholders to ascertain the position. The lender should ensure the real value of the security, as in some cases the true value is hidden in the underlying assets that is mentioned in the concession agreement.

    Are there preferences periods or clawback rights, creditor rights which can impact collateral?

    UAE has implemented Federal Law Number 9 of 2016 concerning Bankruptcy (the Bankruptcy Law), the regime considers secured creditors as "preferred creditors," and the creditors are on the top on the list of priorities. The secured creditors can claim their amount to the extent of their security. Whereas, fees and reasonable expenses are deducted in the sale of such assets before the actual distribution.

    Bankruptcy was earlier regulated by the companies law and the commercial code. However, the UAE government introduced the new bankruptcy law where now all the matters concerning the creditors rights are dealt by this law, however there are several issues with the new bankruptcy law and in order to resolve such issues, the UAE bank Federation introduced a scheme thereby allowing debtors 15 day-period in order to agree with the restructuring scheme with creditors. The laws protecting the rights of creditors are still underdeveloped in comparison with other jurisdictions such as the United States and the United Kingdom.

    What procedures other than court procedures can be used to seize project company assets?

    Outside the court, the parties cannot use any procedures to seize the project company assets; and the standard procedure is through the court, and the secured assets will be sold at public auction to redeem the outstanding amounts.

    Is there any relevant tax, fee or foreign currency restrictions which can impact project finance?

    Though the country has implemented Value Added Tax (VAT), it is not applicable to transfer or conversion of foreign currency.

    What are the rules governing how project companies can maintain foreign currency accounts locally and outside the jurisdiction?

    UAE law does not impose any restrictions for operating or maintaining foreign currency accounts inside or outside the UAE. However, the country might oppose or impose sanctions for receiving and sending money to certain countries due to political reasons.

    How does repatriation of foreign earnings work?

    The UAE laws have not provided for any procedure with regards to the repatriation of foreign earnings, and thus, there are no restrictions for the same.  

    Does any financing and project documentation need to be registered with authorities - if so who?

    The law does not require any financing and project documentation to be registered with the authorities except in the case of registerable security such as real estate mortgages.

    Are government or government agency approvals needed for project finance transactions?

    Government agencies' approvals are required for project finance transactions in the United Arab Emirates. The relevant ministry will differ based on the type of activity concerned.

    Are any incentives provided to foreign investors?

    Incentives are provided to foreign investors in the United Arab Emirates. The United Arab Emirates' regulations offer foreign investors the right to fully own property, the right to be the partners in a company, tax-free initiatives, and investment opportunities in oil, gas and other hydrocarbons.

     

    Which jurisdiction's laws typically cover project agreements?

    Project agreements will typically be covered by the United Arab Emirates' law, the law of the Emirate in which the project is located or any foreign law with international arbitration options.

     

    Which arbitration bodies are typically cited in project agreements?

    There are various arbitration centres in the UAE such as the Dubai International Arbitration Centre (DIAC), Abu Dhabi Commercial Conciliation & Arbitration Centre (ADCCAC) and DIFC-LCIA where companies may refer their disputes.The International Chamber of Commerce (ICC) is the arbitration body typically cited in project agreements in the United Arab Emirates.

     

    What are the typical structures of project companies?

    The type of corporate structure of project companies depend upon the requirement of the parent entities and the length  (or period) of the project.  Limited liability companies and joint stock companies are the most popular forms of corporate structures in the UAE.

     

    Originally published by STA Law Firm on Lexis Middle East Law Alert

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    Sat, 21 Oct 2017 12:00:00 GMT
    <![CDATA[Appiness]]> hAPPINESS

     'If opportunity does not knock, build a door'

    {C}-        {C}{C}Milton Berle

    Yes, Appiness. The time I used to spend on reading, cooking, playing sports is all a thing of past! What do I do these days, you may ask? Apps, apps and apps. They give me appiness. From technology to IT, media to print, virtually every industry in the world is becoming an App fan. Speaking of world, it means global appiness. Are you appy? Let's move on! 

    The media sector is one of the most versatile and dynamic industries on the planet. In contrast to other industries, the media industry does not owe this to the attribute to the constant change in domestic regulatory framework or the evolving faces of global financial climate. On the other hand, trend is the basis of the media industry; and this trend does not originate by itself. Trend is created by the imagination that is backed up by public demand. For instance, when Mickey Mouse first appeared to the public in 1928, there was widespread speculation about the success of an animated figure in comparison to real-life movie stars of the time. But that year marked the birth of a trend for animated movies which gained unprecedented popularity in the century to follow. Although, this article is about the opportunity to create a new trend or pattern rather than spending your valuable time on discussing about the success of trends in the past century

    Talking about the opportunity to develop new trends, the Dubai Media City (the DMC; or the Free Zone) came into existence in 2001 to foster the country's position in the global media industry by providing domestic and international players with a regional base to cultivate contemporary trends in the industry. More than a decade into the future, the Free Zone has become the home to more than 2,000 media companies that push the limits of imagination and creativity each day.

    Company Formation in Dubai Media City: The Process

    The Dubai Media City aims to provide investors in the media sector with exclusive state-of-the-art facilities to facilitate the free flow of creativity and artistry within the region's largest information and communications technology (ICT) community. The Free Zone is equipped with integrated fiber optic cables and custom-built offices and studios to meet the dynamic change in trends of the media industry.

    Investors desirous of business setup in Dubai Media City may set up a free zone limited liability company (FZ-LLC) with natural and corporate shareholders or a branch of a UAE or foreign company. Investors interested in establishing free zone limited liability company in the DMC have to adhere to minimum share capital requirements that have been laid down by the free zone authorities. Whereas, international or domestic entities that are looking to establish their presence in the region may opt to set up a branch office in the Free Zone without any minimum share capital requirements. However, these branch offices are only permitted to carry out the same activities of the parent company in the DMC. But that is not all. Individuals professionals in the media sector also have the option of registering themselves as a sole practitioner in the Free Zone by obtaining a freelance permit and conducting their professional activities under their birth name. This is a significant overhaul of the DMC as compared to other free zones in the region since they do not require a minimum required share capital or a separate legal entity to commence their operations. Due to our significant experience with the process of company incorporation in Dubai Media City, we recommend investors to compile the following documents before initiating the incorporation process in the free zone:-

    Investors may also opt from various office spaces that suit their specific activities once these documents are submitted to the free zone authorities. The Free Zone provides commercial areas, boutique villas, and business centers to facilitate the custom needs and requirements of the media industry.

    The DMC also houses a dedicated innovation platform (in5) that provides a creative and technical environment to media professionals with the view of nurturing their start-ups and students who practice in the media sector. The Free Zone is a distinct city altogether within the heart of Dubai that supports media companies and entrepreneurs with dedicated infrastructure and other miscellaneous facilities ranging from hotels and restaurants to fitness centers and retail outlets. Therefore, the DMC is the premier entrepreneurial platform for investors in the media industry looking to establish their presence in the region. Domestic investors, as well as multinational giants, have opted for this free zone due to their sector-specific requirements. However, applicants should draft the business plan and the application form with care (preferably with the assistance of a law firm that provides bespoke legal advice) to ensure that the company formation process does not face any undue delay.

     

    ]]>
    Sat, 30 Sep 2017 12:00:00 GMT
    <![CDATA[Регистрация Компании в Свободной Экономической Зоне Абу Даби Глобал Маркет]]> Регистрация Компании в Свободной Экономической Зоне Абу Даби Глобал Маркет

    Влияние глобализации и устранение торговых барьеров считается экономическим преимуществом, объединяющим внутренние рынки мира под одной крышей. Однако, существует и противоположное мнение на эту тему. Некоторые финансовые эксперты утверждают, что это глобальное явление послужило источником нестабильности и конкуренции на внутренних рынках. Кроме того, они также утверждают, что выход международных игроков на внутренние рынки часто приводит к дисбалансу сил в местных секторах и отраслях экономики.

    Тем не менее, минимальные торговые ограничения и вмешательство государства все чаще становятся синонимом успеха организации. Это требование в равной степени относится и к современным финансовым центрам. Абу Даби Глобал Маркет (ADGM) в данный момент является самым заметным примером в этом отношении. Финансовая свободная экономическая зона стала ведущей в регионе из-за практического отсутствия торговых барьеров и отсутствия ограничений, налагаемых на материковые компании в Объединенных Арабских Эмиратах. Кроме того, применение международных методов корпоративного управления наряду с международными нормами и стандартами послужили катализатором этого процесса.

    Регистрация Юридического Лица в ADGM

    ADGM предлагает инвесторам превосходное местоположение и динамичную бизнес-среду для привлечения инвесторов мирового финансового сообщества.  Многонациональные корпорации обращаются к финансовой фризоне, чтобы установить свое присутствие в регионе; в то время, как новые инвесторы рассматривают это как возможность работать бок о бок с ведущими компаниями. Кроме того, законодательные акты и правовая структура свободной экономической зоны действуют как магнит для инвесторов, которые стремятся установить или расширить свой бизнес в регионе. ADGM также включает внутренние суды и органы по разрешению споров для избежания последствий Закона Шариата о гражданских и коммерческих спорах на территории фризоны. Свободная зона также предлагает множество решений в области недвижимости для решения вопросов самого высокого уровня различного типа организаций, зарегистрированных во фризоне. Офисные и торговые помещения индивидуальной планировки – это только начало длинного списка преимуществ в ADGM

    Обширный и отлаженный свод законов, который в значительной степени отражает Закон Великобритании о Компаниях 2006 года, но тщательно учитывает требования региона и местные правила. Интересная особенность "организация ограниченного применения", обеспечивающая минимальные требования к раскрытию информации, откроет двери для холдинговых структур, где инвесторы предпочитают защищать конфиденциальную информацию и коммерческую тайну, а также предпочитают иметь региональную холдинговую компанию.

    ADGM добилась существенного развития в сотрудничестве с первыми лицами как внутри страны, так и за рубежом. Взаимодействие с руководящими органами, включая Экономический Департамент Абу Даби, Центральный Банк ОАЭ, Управление Страхования, Управление по Ценным Бумагам и Сырью, Муниципалитет Абу Даби, Комиссия по Финансовым Услугам, установили ориентир.

    ADGM является ключевым пунктом назначения для инвесторов, которые хотят вести финансовую деятельность в Абу Даби. Специальный регулирующий орган по финансовым услугам FSRA регулирует лицензирование всех субъектов, ведущих свою деятельность в финансовом секторе и желающих установить свое присутствие во фризоне. FSRA постаралась предоставить инвесторам многочисленные преимущества, приняв международные стандарты, используемые в международных финансовых центрах Гонконга, Лондона и Сингапура. Итак, финансовый сектор, основанный на риске, будет управляться FSRA при осуществлении различных видов деятельности, таких как банковское дело, хедж-фонды, управление активами и другие финансовые услуги.

    Итак, инвесторы ADGM могут зарегистрировать одну из следующих типов компаний для ведения деятельности в свободной экономической зоне:

     

    Типы компаний

    Детали

    Общество с ограниченной ответственностью участников

    •     Минимум 2 директора (Минимум 1 должен являться физическим лицом);
    •     Минимум 1 секретарь.

    Общество с ограниченной ответственностью участников (Ограниченное гарантиями партнеров, Неограниченное с долями партнеров, Неограниченное без долей партнеров, Ограниченного применения, Защищенная составная компания и Объединенная составная компания)

    •     Минимум 2 директора;
    •     Секретарь не обязателен.

    Филиал (компании, расположенной не в ADGM)

    Подходит для установления присутствия или представительского офиса.

    Партнерства (Генеральное Партнерство, Ограниченное Партнерство и Партнерство Ограниченной Ответственности)

    *Зависит от типа партнерства

    Филиал (Генерального Партнерства, расположенного не в ADGM, Ограниченного Партнерства,  расположенного не в ADGM & Партнерства Ограниченной Ответственности) 

    *Зависит от модели партнерства

     

    Заявители, желающие  открыть компанию в ADGM, должны подать заявку (онлайн) вместе со следующими документами для ускорения процесса подачи:

    •                     Копия паспорта, визовая страница или иммиграционный штамп о въезде в страну, удостоверение личности Emirates ID директора (-ов), уполномоченного лица, секретаря и акционера (-ов);
    •                     Заявление на бронирование предполагаемого имени компании;
    •                     Бизнес-план компании;
    •                     Отчет о капитале и первоначальный пакет акций (для компаний, ограниченных уставным капиталом);
    •                     Заявление о гарантии (для компаний, ограниченных гарантией);
    •                  Заявление предполагаемых должностных лиц организации;
    •                  Документ о резервировании товарного знака;
    •                 Заявление с предполагаемым адресом компании;
    •                  Копия Устава компании;
    •                 Копия решения Совета Директоров;
    •                  Копия договора аренды офисного помещения;
    •                  Подтверждение ограниченной сферы деятельности компании;
    •                  Заполненная и подписанная форма защиты данных  (DP-01);
    •                   Надлежащим образом заполненная и подписанная форма бенефициара или конечного владельца (BO-01), и
    •                  Любые другие документы, которые могут потребоваться руководством в зависимости от сферы деятельности компании.

     

    Однако, компаниям, которые хотят вести финансовую деятельность во фризоне, может понадобиться пройти строгий процесс регистрации, так как FSRA будет рассматривать их заявки. Соответствующий орган (FSRA для финансовых услуг и Орган Регистрации ADGM для нефинансовых услуг и продаж) выдаст лицензию после того, как заявка будет подана и рассмотрена. Впоследствии заявитель должен будет обратиться за учетной записью в FAWRI (онлайн система подачи заявок) и иммиграционной картой для подачи на визы для инвесторов и сотрудников, которые будут работать в компании.

    Регистрация компании в  ADGM может быть сложным процессом (особенно для юридических лиц, осуществляющих финансовую деятельность) с обширной документацией и процедурами соблюдения. Инвесторам рекомендуется воспользоваться услугами юридической фирмы, предоставляющей консультации по открытию компаний в ADGM, которая поможет решить вопросы с документацией и длительными процедурами регулирования, установленными фризоной для соответствия международным корпоративным нормам. 

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    Fri, 28 Jul 2017 05:00:00 GMT
    <![CDATA[FIDIC и ENAA: тщательное сравнение]]> FIDIC AND ENAA COMPARISION

    In the complex and technical world of construction and large manufacturing projects, the contracts and negotiations on the terms of an agreement between the parties are a means to keep the complex relation of parties within the bounds of clear understanding by utilizing a standard form of contract. The industry has seen the development of a various standard form of contract including, FIDIC (Fédération Internationale des Ingénieurs-Conseils), JCT (Joint Contracts Tribunal), ENAA (Engineering Advancement Association of Japan), ICE (Institution of Civil Engineers), etc. This list is not exhaustive but only indicative as there are numerous standard forms. We will discuss the standard form of contract produced by FIDIC and ENAA.  

    The FIDIC standard form of contract is internationally recognized and a utilized form of contract. FIDIC, established in 1913 by three countries namely Belgium, France, and Switzerland presently covers 97 countries as its member and has created forms of contract which are used extensively throughout the world. ENAA is a non-profit organization established in 1978 with the support of the Ministry of International Trade & Industry of Japan. Members of ENAA consist of 217 Companies (as of April 2016). The aims of the above organizations, in general, are to achieve inclusive, dynamic and sustainable development while having a voice for engineering professionals and, among other things, provide integrated assistance. 

    FORMS OF CONTRACTS

    FIDIC

    FIDIC has the best-known standard contracts which are as follows:

    • The Contract for Works of Civil Engineering Construction (Red Book, 1987 First Edition, revised in 1999).
    • Conditions of Contract for Electrical and (for) Mechanical Works including Erection on Site (Yellow Book, 1987 First Edition, revised in 1999).
    • Conditions of Contract for Design-Build and Turnkey (Orange Book, 1995).
    • Conditions of Contract for EPC Turnkey Projects (Silver Book, 1999 First Edition).
    • Conditions for Design, Build and Operate contracts (Gold Book, 2007).
    • Conditions of Contract for Plant and Design-Build (Yellow book, 1999 First Edition).
    • Conditions of Contract for i) Design, ii) Build and iii) Operate (the DBO) Projects (DBO Contract, 2008 First Edition).

    Other FIDIC contracts which are less known are the Turquoise Book for Dredging and Reclamation Works (January 2006), and also, the White Book Model Services Agreement (October 2006)

    ENAA

    ENAA also has model forms which are increasingly used by the industry recently in the past 12 years. The forms are as follows:

    §  International Contract for Process Plant Construction (1986 – First Edition, revised in 1992 and 2010)

    §  International Contract for Power Plant Construction (Turnkey Lump-sum Basis) (1996 – Second Edition, revised in 2012)

    §  International Contract for Engineering, Procurement and Supply for Plant Construction (EPS type contract) (2007 Edition, revised in 2013) 

    General Comparisons

    The content structure of the FIDIC forms of contracts often consists of general conditions, forms of tender and contract agreement, guidance for the preparation of the particular conditions, and dispute adjudication agreements. The ENAA model forms' in its latest Process Model Form – 2010 edition consists of a form of contract, general conditions, and guide notes. Wherein Volume 2 includes a sample of an appendix, Volume 4 consist of work procedures and Volume 5 consists of the general conditions and the form of agreement (an alternative form of industrial plant – without process license). The Power Model Form - 2012 edition consists of a form of agreement, and general conditions and Volume 2 provides a sample of appendices to the agreement.

    Although the FIDIC forms seem to be very well drafted "by the engineers for the engineers," is seemingly balanced, have many provisions, and are very extensive, they bring out the fact that legal layman draft such contracts. ENAA is written well with clear, precise, and short wordings. For the purpose of this article, with consideration to its possible limitations, we shall be comparing between FIDIC's Yellow (Conditions of Contract for Plant and Design-Build, 1999 – First Edition) and ENAA's Power Plant Construction Form – 2012.  However, there can be references in general to other forms, when stated otherwise. Where the Yellow book is for Plant and Design Build, ENAA's Power Plant construction model form is a turnkey form for BOT (build-operate-transfer) projects.

    Data Accuracy Obligations

    In the yellow and silver book under Sub-Clause 4.10 Site Data, there seem to be no obligations on an employer regarding an error in data provided by him. However, the responsibility for proper interpretation of information is put on the contractor as below text interprets:

     "The Contractor shall be responsible for (and) interpreting all such data."

    Further, it states:

    "To the extent which was practicable (taking into account the cost and time), the Contractor shall be deemed to have obtained all (relevant; and) necessary information as to (inherent) risks, the contingencies and (all) the other circumstances which may influence or affect the Tender or Works. To the same extent, the Contractor shall be deemed to have inspected and examined the Site, its surroundings, the above data and other available information, and to have been satisfied before submitting the Tender as to all relevant matters,…."

    The above words clearly indicate that the responsibility is put on the contractor as the contractor is responsible for obtaining necessary information. Which includes but is not limited to the form and nature of the site, including the hydrological and climatic conditions, subsurface conditions, and the extent and nature of the work and goods that are necessary for executing and completing the works for remedying of any defects. Though the provision states that when "taking account of cost and time" it becomes highly difficult to determine such factors of time and "practicability." Thereby rendering the provisions uncertain without laying down a clear responsibility on the employer for any information provided. Thus, the above clause and in fact the entire yellow book does not foresee any obligation on an employer for inaccurate information and even fails to place responsibility on an employer for correct information.

    Whereas the ENAA provisions under General Conditions 10.1 states that:

    "The Owner(s) shall ensure (at all times) the correctness and exactitude of (each and;) all information and or data to be (provided; or) supplied by the Owner(s) as described in Appendix 9-3 (Scope of Works and Supply by the Owner(s)) except when otherwise expressly stated in the Contract,"

    As such it is clear that the ENAA form makes it the responsibility of an employer/owner to provide correct data before and during the contract.

    Accordingly, the contractor bears a heavy burden of not only accessing accurate data provided by the employer but also bears the responsibility for any physical condition[1]{C}{C}{C}{C} Under the definition of unforeseeable{C}{C}{C}{C}[2]When this occurs, foreseeability will depend again on examination by the contractor.

    Employer's Requirements

    As per Sub-Clause 1.9, an experienced contractor should give notice to the Engineer who will be entitled to the terms of Sub-Clause 20.1 [Contractor's Claims] when the contractor fails to discover errors in an employer's requirements. These errors would get overlooked while exercising due care and scrutiny of the Employer's Requirements under Sub-Clause 5.1 [General Design Obligations]. 

    Further, "the Engineer shall proceed in accordance with Sub-Clause 3.5 [Determinations] to agree or determine (i) whether and (if so) to what extent the error could not reasonably have been so discovered."  

    The yellow book or other such forms having similar provisions place a heavy burden on the contractor to review the employer's requirements at the tender stage. Further, as per every variation[3]Bearing in mind that from time to time to examine the employer's requirements before providing a tender and examinations without emphasizing on the obligation of an employer for such errors or on the engineer while evaluating the requirements issued by the employer.  It is pertinent to note that providing the employer's need is a factor in the control of employer which is published as per his ideas and concept of the project along with all technical and quality consideration which must also be a proper valuation of the contract price. Therefore, it is the employer who must retain responsibility for the definition and description of the works. Failing such demarcation and allocation of liability creates doubts as to the practical implementation of such provisions. 

    The above provision of Sub-Clause 1.9 further seems contrary to clause 5.4 which states as:

    "5.4 Technical Standards and the Regulations: The design, the Contractor's (each and all) Documents, the execution and the completed Works shall (in totality) comply with the Country's technical standards, the building, construction and (also;) environmental Laws, Laws applicable to the product being produced from the Works, and other standards specified in the Employer's Requirements, applicable to the Works, or defined by the applicable Laws."

    The above states that the design and contractor's documents must be in accordance with employer's requirement. However, the responsibility of errors in employer's requirement is not enforceable or even actionable against the employer under this form of contract. Further, only if it is determined to be undiscoverable by the engineer the contractor will be entitled to cost and extension of time.

    The ENAA model form under General Conditions Sub-Clause 27.3 - Defect Liability states:

    "The Contractor's obligations under this GC 27 shall not apply to ..........................(3) any designs, specifications or other data designed, supplied or specified by or on behalf of the Owner, or any matters for which the Contractor has disclaimed responsibility hereunder ."

    The above clause excludes the liability of the contractor on design discrepancies, errors or omissions if such erroneous specification, drawing or such technical documents are prepared due to inaccurate information provided by or on behalf of the employer. The ENAA form also provides that the contractor shall make reasonable site examination and other data, however, puts the obligation on the employer for inaccuracy. This clause in is accordance with the principle of the risk of liability being placed on the party who can control such risk.

    Part II of this two series article will discuss Design obligations, force majeure, and other relevant provisions. 

    [1] Sub-Clause 4.12 provides. For example, "physical conditions" means natural physical conditions and those that are man-made. Further, other pollutants and physical obstructions which the Contractor may encounter at the Site while executing the Works. These include sub-surface and hydrological conditions but exclude weather.

    [2] in sub-clause 1.1.6.8 climatic conditions are not included. "Unforeseeable" is defined as unreasonably foreseeable by an experienced Contractor on the date of submission of the Tender.

    [3], 1.1.6.9 "Variation" means changes to the Employer's Requirements or the Works, which are instructed or approved as a Variation under Clause 13 [Variations and Adjustments].

     

     

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    Fri, 14 Jul 2017 06:00:00 GMT
    <![CDATA[The Prenup to Every Merger and Acquisition]]>  

    The word 'efficiency' may not mean much for those of you who were absent during economics class in school. It is a term around which the whole concept of economic studies in based. Investopedia[i] defines 'efficiency' as the allocation of resources in an optimal manner to serve a company or an individual in the best method by reducing waste. It is the concept of getting work done with the least amount of resources. But that comes at a cost. Many a time, companies try to reduce their costs and maximize profits by employing cheaper materials and inefficient human resources. Companies also try to maintain or increase the level or standard of their output by pooling their resources. While the former is one of the least preferred methods to obtain efficiency, the latter has gained popularity due to the enhancement of corporate structures and growing consumer demands. But efficiency is a million-dollar word.

    A similar story lies behind one of the largest mergers in history between Henry J. Heinz Company and Kraft Foods Group, Incorporation. This merger created one of the major players in the food and beverages industry. Ergo, companies should review every aspect, factor and underlying right(s) of all the parties before initiating a merger or restructuring a corporate structure. The structure and type of merger may primarily depend upon the industry and the size of the companies. For example, when the investor limits the transaction to the assets of another company; such an acquisition is an asset purchase. However, when the investors are interested in buying the shares of the other company, the structure of the merger should be remolded to that of a share acquisition. Hence, it is evident that the structure and type of merger or acquisition are decided upon after considering and understanding the factors involved, the extent of assets and liabilities of the companies and the jurisdiction of the parties. Therefore, the benefit of opting for a particular structure or type of merger may be detrimental to the other party. Therefore, this article seeks to draw a line between an asset sale and share purchase and explain about the advantages and disadvantages of both these structures from the purview of private companies in the United Arab Emirates (UAE).

    Status quo in the UAE

    The principles of contracts govern the mergers and acquisitions in the UAE. The primary piece of legislation that has laid down the provisions regarding the matter is Federal Law Number (2) of 2015 on Commercial Companies (the Companies Law). Article 22 of the Companies Law has stated that a UAE national should hold at least fifty-one (51%) shares of an onshore company in the UAE should be and branch offices of foreign entities in the UAE may appoint a local agent to conduct trade in the UAE. Therefore, transfer of shares in companies established in the UAE should adhere to this restriction on foreign ownership.

    Transaction structures for private companies

    As mentioned earlier, investors have the option of either acquiring the shares of the company (a share acquisition) or the assets of that company (an asset acquisition). The investors should conduct due diligence and agree on one of the two (2) structures depending on the factors discussed below:

    Share Sale

    In the case of a share sale, once an investor has purchased all the shares of a particular company, all the assets and liabilities of that company (known or otherwise) will be transferred to the acquirer. Therefore, the status of the target company is not affected by a share sale; however, with a new owner and the seller of the shares will lose his nexus with the entity. It is pertinent for the buyers to conduct extensive due diligence process by employing a law firm that provides bespoke legal advice before purchasing the shares of a company since the investors will assume all the obligations of the business entity. Therefore, the buyer should also negotiate the indemnity, insurance, and warranty of the exact liabilities to mitigate any issues that may arise. However, these solutions are not comprehensive since they may face problems in enforcement since their value depends on the creditworthiness of the seller. Further, an indemnity clause may also be restricted from full enforcement since it is likely to constitute unjust enrichment - prohibited by Sharia Law. Therefore, the injured party can only enforce indemnity to the extent of loss that they have suffered. Minority shareholders will be left when a buyer cannot acquire hundred percent (100%) shares in a company.

    The buyer and seller have to comply with all the restrictions on pre-emptive rights provisions in the company's constitution or the shareholders' agreement.

    However, share sale also has substantial advantages since the investors do not have to purchase every asset of the company individually. The objective of purchasing the assets is indirectly covered in the transfer of shares. This means that the investor acquires all the contracts and other third-party obligations also. However, the buyers should review change-of-control and termination clauses and may also have to obtain the approval or consent of the third parties before those contracts can be executed. Therefore, the investors should ensure that the seller provides all requisite approvals from all third-parties including regulatory approvals before the completion of the transaction. Specifically, the investors should make sure that the DED (Department of Economic Development) of the respective Emirate approves the transfer of shares and issues an amended license with the new ownership status. The target company may not be permitted to conduct its activities in the UAE without a valid license.

    Asset sale

    On the other hand, the investor will only acquire the specific assets and liabilities that are identified. This provides investors with a higher degree of certainty since the investors and handpicks the exact assets and liabilities that they want to acquire. However, buying some assets may also mean acquiring certain liabilities. For example, the investor may be liable for any environmental problem in the real estate property. When the property purchased by the investors are a part of another contract, then the buyer will also be liable for the provisions under those contracts from the date of transfer. However, unidentified assets and liabilities are not transferred to the investors.

    This method is considerably more ambiguous and complicated than share sale since every asset has to be transferred individually by delivery (for a moveable property) or by transfer of title (for real estate). Therefore, the investor should acquire every property and machinery owned by the target company. The ownership of the seller (i.e. the shares in the company) does not change at the completion of an asset sale. These shareholders will continue to be the legal owners of the company since they hold the shares. Further, if an investor who wishes to obtain the benefit of a license or contract; they will need that particular right to be transferred separately. It is pertinent for investors to note that commercial contracts generally contain a clause that restricts the right of the parties to assign the contract to any third-party. Therefore, the investor should explicitly make sure that the seller obtains all approvals required when there is a provision that restricts the novation or assignment of a particular document without the approval of the other party. Federal Law Number 18 of 1993 issuing the Commercial Transactions Law has mentioned the procedures and conditions that the parties should adhere to while transferring a company's property. Article 42 of this law has stated that any action that may deal with the transfer of ownership of a company's property should be attested and authenticated by the Notary Public and should also be registered in the Commercial Registry. Further, Article 45 (1) has also stated that the investor must publish a summary of the contract of sale in two (2) daily Arabic newspapers (between an interval of one week) with the view of providing creditors of the target company to put forward any objections or claims against such sale.

    Miscellaneous

    Transfer tax is not applicable on transfer of the share of companies in the UAE. However, a transfer fee of four percent (4%) shall apply to the transfer of shares of a company established in the UAE. Further, a transfer tax ranging from 1% to 4% is charged on the assignment of real estate right by the Policy Sale Services at the Dubai Land Department. The rate may vary with the nature of the property interest and the particular Emirate.

    On the other hand, in share sales, the employees of the target company will continue to work under the business, and the change in ownership will not change the employment relationship between the employees and the company itself. Although, this general rule does not apply to foreign employees. Federal Law Number 8 of 1980, as amended and Ministerial Order Number 13 of 1991 (collectively, the Labour Law), a foreign employee's sponsorship cannot be transferred to a new employer. However, the buyer may draft new employment contracts for foreign employees of the target company, in the prescribed forms of the Ministry of Immigration and Labor. In an asset sale, the employees of a company cannot be transferred automatically. Although, the investors have the option of revoking the present employment contracts and registering new employment contracts under the new entity. Ergo, companies have to make sure that their transactional structures are most suitable after considering all the factors to safeguard the rights of the parties.


    [i] http://www.investopedia.com/terms/e/economic_efficiency.asp

     

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    Thu, 29 Jun 2017 14:00:00 GMT
    <![CDATA[Юридическая Ответственность Нового Партнера в Компании]]> Юридическая Ответственность Нового Партнера в Компании

    Новые и стратегические партнерские отношения могут стать отличным способом оживить упадочный бизнес. В течение последних нескольких лет это делалось огромными компаниями - выбор партнера для создания крепости на рынке.Например, Apple и IBM, две колоссальные компании, выбрали партнера в 2014 году. Spotify и Uber также вступили в партнерство в 2014 году, чтобы вместе предоставлять услуги по обмену музыкой и по распределению поездок. Кто бы мог подумать?

    В этой статье мы хотели бы изучить, как новые партнеры включаются в бизнес, их юридические обязанности, особенно в юрисдикции ОАЭ.

    Закон ОАЭ о коммерческих компаниях (Закон о компаниях)[i] определяет компанию как: 

    "Контракт, в соответствии с которым два или более лица обязаны участвовать в хозяйственном предприятии с целью реализации прибыли путем внесения доли в капитале или работе и деления между собой прибыли или убытка, принесенного предприятием».

    Поскольку компания должна создаваться двумя или более лицами, число лиц, необходимых для регистрации и создания компании, зависит от юридической формы рассматриваемой компании.

    Различные юридические формы, которые могут быть приняты компанией, изложены в соответствии с законом в статье 9 Закона о компаниях, в которой говорится, что: 

    "Компания принимает одну из следующих форм: Общество с ограниченной ответственностью; Простая командитная компания; Открытое акционерное общество; Публичное акционерное общество; Частное акционерное общество».

    Законодатели устранили два вида юридических форм: совместные предприятия и компания с ограниченной ответственностью. Это должно обеспечить дополнительную прозрачность и ясность. Поскольку совместные предприятия не имеют отдельной юридической личности, считается, что партнеры достаточно легко  могут исчезнуть, что приведет к существенной потере для других партнеров. Кроме того, компании, ограниченные акциями, почти полностью аналогичны простым ограниченным партнерствам, что делает их существование ненужным.

    В дополнение к этим правовым формам мы также хотели бы упомянуть так называемую компанию де-факто, которую кассационная судебная система определила как:

    "...Коммерческая компания, созданная партнерами, даже если она не является ни одной из форм, упомянутых в пятой статье закона о коммерческих компаниях, является компанией де-факто и (как только она создана) становится юридическим лицом».

    Однако де-факто компании не соблюдают процедуры и положения, определенные законом, касающиеся регистрации компании. Таким образом, эта компания формируется по желанию партнеров. Компания де-факто также может быть создана в силу обстоятельств отличающихся от желаний партнеров. Например, компания может быть сформирована, когда несколько человек наследуют отдельное учреждение, которое, таким образом, превращается в компанию де-факто.

    Например, в компании с ограниченной ответственностью деятельность может быть начата с двумя партнерами, в то время как максимальное число партнеров  - пятьдесят (50). Количество партнеров в частном акционерном обществе не менее трех человек, а в открытом акционерном обществе не может быть менее десяти (10) человек.

    Закон о компаниях ОАЭ, однако, также разрешает включение лица в компанию в качестве партнера после его создания. Однако этот вопрос варьируется от одной юридической формы компании к другой.

    Это приводит к вопросу, в чем ответственность нового партнера, который присоединился к компании после ее регистрации?

    Общество с ограниченной ответственностью

    Статья 30 Закона о компаниях гласит, что: "Компания с совместным участием - это компания, состоящая из двух или более партнеров, которые являются физическими лицами, несут совместную ответственность за все свои средства по обязательствам компании." Другими словами это означает, что партнеры несут совместную ответственность и имеют неограниченную ответственность за все долги своей компании. Кредиторы компании имеют юридические средства для погашения своих долгов партнерами компании, однако закон избавляет выбывших партнеров от этого обязательства.

    Разумеется, новые партнеры могут быть включены в общее партнерство, и одним из способов, которым это может быть сделано, является передача акций от старого партнера, который может уйти в отставку, как упомянуто выше, к новому. Закон также гласит, что партнеры не могут передавать акции без открытого разрешения всех других партнеров, участвующих в компании.

    После того, как передача акций будет одобрена, вышеупомянутое обязательство кредиторов будет применяться к новому партнеру, чтобы последний отвечал за долги компании.[ii]

    Простая командитная компания

    Возможности и обязанности партнеров в простой компании сильно отличаются от возможностей в партнерской компании. Эта юридическая форма компании состоит из одного или нескольких совместных партнеров и одного или нескольких пассивных партнеров. Поскольку первые несут личную ответственность за все обязательства компании, последние несут ответственность только за эти обязательства в пределах своих собственных акций в капитале компании. Текст в вышеупомянутом законодательстве компаний подчеркивает, что любой текст о различии ответственности партнера должен соответствовать его положению, действующего или пассивного партнера (Статья 62).

    Правовые требования о передаче акций, которые применяются к компаниям общего товарищества, также применяются к простым командитным компаниям. Поэтому передача доли может осуществляться в соответствии с договором компании или с одобрением всех вовлеченных партнеров.

    Акционерная компания

    Партнер в акционерном обществе несет ответственность за обязательства своей компании в размере своего вклада в акционерный капитал.

    Партнер в акционерном обществе несет ответственность за обязательства своей компании в размере своего вклада в акционерный капитал.  Партнерам разрешено передавать свои акции, однако этот перевод не принимается во внимание до даты  его регистрации в реестре, связанном с акциями. Несмотря на эту проблему, нерегистрация доли фактически не препятствует новому партнеру требовать его права на эти акции с даты заключения договора купли-продажи. Кассационный суд рассмотрел в этом отношении в апелляционном номере 155/2002, в котором говорится, что:

    "Если в тексте статьи 162 Закона о компаниях говорится, что: «Владение акциями передается путем подтверждения действия в письменной форме в реестре в компании, и эта регистрация помечена на акции …' Это означает, что владение акциями общего акционерного общества не передается от продавца покупателю до даты регистрации его в реестре акций, в котором компания регистрирует все свои доли, однако договор купли-продажи этих акций накладывает обязательство на продавца передать свою собственность покупателю, и это приводит к тому, что его дивиденд переходит покупателю с даты заключения договора купли-продажи, даже если он не зарегистрирован, если не оговорено иное».

    Компания с ограниченной ответственностью

    Партнер в компании с ограниченной ответственностью не несет ответственности за долги и обязательства этой компании, за исключением своей доли. Долги, которые занимают раскрытие финансовой информации этой компании, связаны с ее акциями, поэтому нет существенной разницы между старыми или новыми партнерами. Они также несут ответственность, не зависимо от того, являются ли партнерами-учредителями или только партнерами.

    Что касается общества с ограниченной ответственностью, Закон о компаниях представляет собой определенную систему передачи доли одного партнера другому. И это можно резюмировать в следующем:

  • Партнер, который хочет передать свою долю, должен уведомить остальных партнеров, а уведомление должно осуществляться через управляющего компанией.      
  • Менеджер должен уточнить условия передачи в соответствии с уведомлением партнера.
  • Каждый партнер имеет право получить эту долю в соответствии с согласованной ценой и в случае несогласия, один или несколько экспертов с техническим и финансовым опытом по данному вопросу должны ее оценить.
  • Партнер имеет право делать все, что захочет, с его долей, если прошло 30 дней с даты уведомления о желании передачи.

    Вывод

    Как мы видим, существует закономерность юридической ответственности нового партнера. Это означает, что каждый партнер компании несет ответственность за долги своей компании в пределах своей доли, независимо от юридической формы компании, в которой он участвует. Нет никакой реальной разницы, связанной с юридической ответственностью, между партнерами-основателями и новыми партнерами, которые входят в компанию после регистрации и начала деятельности. И, возможно, это правило оправдано по двум причинам. Во-первых, долг явно связан с деятельностью компании и с акциями, которые составляют капитал этой компании. Поэтому просто имеет смысл, что эти долги не имеют никакого отношения к самим партнерам. Во-вторых, сделано обоснованное предположение о том, что новый партнер решил войти в компанию после полного ознакомления с финансовым положением этой компании. Следовательно, он полностью осознает, что он делает, и делает этот выбор сам по себе. Единственным исключением из этого правила является ответственность совместных партнеров в товарищеских и простых компаниях.

    [i] Federal Law No. (2) Of 2015

     

    [ii] Article 54 - Where a partner joins the company, he shall be jointly liable with the other partners and in all his assets for all the former obligations of the company prior to his joining the company, provided that the company has already disclosed such obligations to that partner, and shall be jointly liable with the other partners for the obligations of the company after to his joining the same. Any agreement between the partners to the contrary shall not be effective as evidence against third parties.

     

     

     

     

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    Thu, 08 Jun 2017 05:00:00 GMT
    <![CDATA[Гарантии - Законодательство и Практическое Применение в ОАЭ]]>Гарантии - Законодательство и Практическое Применение в ОАЭ   «Кредит - это система, при которой лицо, которое не может заплатить, использует другого человека, чтобы гарантировать, что он может заплатить». - Чарльз Диккенс   В современном мире хрупких финансов ирония утверждения Чарльза Диккенса хорошо понятна. На этих нестабильных финансовых рынках должники и заемщики стараются выполнить свои финансовые обязательства. Поэтому банкам-кредиторам и учреждениям необходимо быть осторожными и принимать меры по защите и обеспечению их инвестиций.   Поручительство играет важную роль в сделках с долговым финансированием. В рамках обычной коммерческой практики, гарантии, предоставляемые корпорациями или физическими лицами по долгам третьих сторон, часто используются кредиторами учреждения в качестве одной из форм обеспечения. Хотя гарантии смягчают риск, они не исключают его из сферы финансирования ценных бумаг, даже гарант может не выполнить свои обязательства. Следовательно, кредитор должен убедиться в том, что все вероятности в отношении таких гарантий в ОАЭ предусмотрены.     Независимо от вышесказанного, гарантии обеспечивают дополнительную безопасность для кредитора, поэтому гарантированные ценные бумаги часто являются необходимым условием для предоставления финансирования основному должнику. Настоящая статья направлена на изучение правового ландшафта гарантий и применимости таких гарантий в трансграничных сделках, а также законов, касающихся обеспечения соблюдения этих гарантий в рамках нормативной и оперативной базы ОАЭ.   Правовые основы гарантий в соответствии с Законом ОАЭ Концепция Гарантии основывается на законодательной базе Федерального Закона ОАЭ № 5 от 1985 года с поправками (Гражданский кодекс). В главе V Гражданского кодекса подробно излагается действие гарантии (поручительства) в отношении прав и обязанностей основного должника (должника по обязательству), кредитора (кредитора по обязательству) и гаранта (поручителя). Статья 1056 Гражданского кодекса определяет гарантии как поручительство, состоящее из «присоединения к ответственности лица, называемого поручителем, с ответственностью должника по обязательству при исполнении своих обязательств».   Гражданский кодекс прямо предусматривает условия, которые регулируют выдачу и исполнение гарантий, в том числе:  
  • Для того чтобы гарантия была действительной, основной должник должен быть обязан кредитору в отношении долга или имущества известного лица и должен быть в пределах возможностей гаранта выполнить это обязательство;
  • Если нет требования третьей стороны, основной должник и гарант освобождаются от своих обязательств, если кредитор принимает альтернативный способ погашения задолженности;
  • Обязательство гаранта является вторичным по отношению к обязательству основного должника. Любое погашение обязательств основного должника может погасить обязательства гаранта;
  • Если основной должник становится банкротом, кредитор должен доказать свою задолженность в случае банкротства, в противном случае он утратит свое право требовать или регресса против гаранта в размере понесенного ущерба или любых невыплаченных взносов в связи с тем, что он не доказал свою задолженность в банкротство;
  • При погашении долга кредитор должен предоставить поручителю все необходимые документы, с тем чтобы гарант мог воспользоваться своим правом регресса против основного должника; а также
  • Кредитор имеет право на требование или юридическое обращение в отношении основного должника или гаранта или и того, и другого.
  •   Приоритет Жалобы   Как свидетельствует большинство регулирующих финансовых режимов во всем мире, правовой режим в ОАЭ признает приоритет кредиторов и признает, что простое исполнение гарантии не делает банк или финансовое учреждение обеспеченным кредитором. Для того чтобы зарекомендовать себя в качестве обеспеченного кредитора и иметь паритетный ранг с другими кредиторами на момент исполнения требования, кредитор должен обеспечить гарантию залогом. Такие ценные бумаги могут иметь форму ипотеки или залога в отношении активов гаранта.    Ограничения по времени для обеспечения гарантий   Далее рассматривается вопрос о сроке давности, в течение которого кредитор может действовать против гаранта по уплате им причитающихся ему долгов. Хотя статья 1092 Гражданского кодекса предусматривает, что «кредитор должен требовать долг в течение шести месяцев с даты установленной уплаты, а в противном случае гарант считается уволенным», суды ОАЭ столкнулись с противоречивыми заявлениями.     Хотя Кассационный суд Дубая установил, что гарантия является гражданским обязательством и что требование в отношении гаранта должно быть возбуждено в течение шести месяцев с даты оплаты, Верховный суд в Абу-Даби ограничил свою интерпретацию этой же статьи, чтобы временные ограничения не распространялись на гарантии в коммерческих сделках. Таким образом, общепринятой практикой является мягкое толкование положения о лимитировании сроком на 6 месяцев в соответствующих транзакционных документах, особенно в тех случаях, когда бенефициарами являются банки и финансовые учреждения, которые распространили применимое ограничение срока действия на срок свыше 6 месяцев. Однако эта практика не гарантирует, что положение перестанет иметь силу, вот почему кредиторы должны принимать разумные меры для защиты своих интересов. В свободных зонах или оффшорных юрисдикциях эти законы различаются. Например, законодательство в судах Дубайского международного финансового центра (Суды DIFC) обеспечивает гораздо более широкий интервал времени. Исключая случаи мошенничества, иск не может быть возбужден по прошествии более шести лет с даты возникновения основания для иска. Следует отметить, что в тех случаях, когда законодательство о свободных зонах умалчивает такие ограничения, применяются положения Гражданского кодекса ОАЭ.   Особая гарантия   Чтобы установить, является ли гарантия действительной и имеет юридическую силу, важно установить характер гарантии. В гарантии «всех денег» гарант гарантирует все обязательства основного должника перед кредитором, независимо от того, существуют ли они во время поручительства или появляются в будущем. Тем не менее, такие гарантии могут не поддаваться принудительному исполнению в ОАЭ.   Статья 1061 Гражданского кодекса требует, чтобы гарантии выдавались в отношении определенной задолженности или определенной суммы, и поэтому они должны ссылаться на сумму или объект, гарантированные гарантом. Кроме того, Кассационный суд Дубая постановил, что договор поручительства является недействительным, если он не определяет гарантированную сумму; или включает основание, на которое должна рассчитываться гарантированная сумма; или ссылается на кредитную линию, предоставленную основному должнику.  Хотя были решения, в которых суды ОАЭ признавали и применяли гарантии «всех денег», такие решения не устанавливают приоритет.   Гарантии в отношении дочерних компаний   В большинстве сценариев исходная компания может гарантировать кредит, предоставленный ее дочерней компании (или корпоративной группе компаний в соответствии с уставными документами головной компании) при условии получения необходимых корпоративных одобрений, включая решение совета директоров и акционеров. Аналогичным образом филиал может также предоставить обеспечение в отношении займа своему материнскому предприятию в соответствии с вышеизложенными условиями.   Однако существуют определенные оговорки в отношении гарантирования обязательств компанией. Например, директор оффшорной компании в ОАЭ должен действовать осмотрительно и в интересах компании, как это предусмотрено Федеральным законом № 2 от 2015 года (Закон о компании). Статьи 153 и 154 Закона о компании налагают ограничения на компанию для гарантирования любого кредитного соглашения, заключенного членами совета директоров с третьей стороной, а также ограничивают директора от заключения каких-либо соглашений о займе, которые могут включать гарантии на срок, превышающий три года.   Аналогичным образом, субъекты свободной зоны устанавливают аналогичную ответственность директоров. Статья 53 Закона DIFC № 2 от 2009 года гласит, что «директора должны, в частности, действовать честно, добросовестно и законно с учетом наилучших интересов компании.' В этих обстоятельствах директора как для оффшоров, так и для оншорных компаний должны осторожно приступить к совершению сделки при гарантии финансового риска другой компании.   Гарантия трансграничного финансирования    Правовые рамки ОАЭ не налагают никаких ограничений на гарантии, распространяющиеся от национальных сторон на иностранных кредиторов. До тех пор, пока такие гарантии соответствуют положениям закона ОАЭ или законам оффшорной юрисдикции. Такие гарантии должны быть представлены в письменной форме и указывать сумму, обеспечающую гарантию, как указано ранее.   Однако в случае, если ценная бумага исполняется в отношении недвижимого имущества, такая гарантия не может быть предоставлена иностранным банкам, если у банка нет лицензии на коммерческое банковское обслуживание в конкретном эмирате, где находится недвижимое имущество. Однако на практике иностранные банки, кредитующие заемщиков ОАЭ, как правило, назначают местный банк в качестве агента.    Обеспечение движимого имущества может быть предоставлено иностранным банкам-нерезидентам, за исключением случаев, когда:   i. Если это деловая ипотека в отношении активов в свободной зоне Джебель Али, созданной в соответствии с Законом о коммерческих операциях. В этом случае он может быть распространен только на банки или финансовые учреждения, имеющие лицензию на коммерческое банковское обслуживание. ii. Залог средств на банковском счете. Такие залоги могут быть предоставлены только банку- владельцу счета. Однако на практике иностранные банки-нерезиденты обычно назначают местного агента для обеспечения безопасности.   Кроме того, компания, зарегистрированная в DIFC, может предоставить гарантию по долгу заемщика, кто находится внутри или вне DIFC или ОАЭ, если предоставление гарантии соответствует уставу компании, и после получения необходимых разрешений.   Истечение срока гарантии   Истечение срока действия гарантии перечисляется в Статье 1099 Гражданского кодекса, которая предусматривает прекращение или истечение срока действия гарантии, в частности по следующим вопросам: i. Погашение задолженности; ii. Ухудшение / утрата ценных бумаг в руках основного должника в силу форс-мажорных обстоятельств до подачи требования; iii. Основной договор между кредитором и основным должником, заканчивающийся после того, как кредитор начислил свое право на основного должника; iv. Кредитор, освобождающий гаранта от своей ответственности или должника по долгу; v. Смерть основного должника   Помимо вышеизложенного, как предусмотрено статьей 1101 Гражданского Кодекса ОАЭ, гарантия может быть также расторгнута, если между гарантом, должником и кредитором будет достигнуто соглашение о части задолженности, и если этот долг будет урегулирован, то оставшаяся задолженность будет отменена. В соглашении должны быть четко указаны условия, в которых стороны желают отказаться от ответственности поручителя, и в этом случае гарант не будет нести ответственность и будет инициировано автоматическое прекращение гарантии. На основании указанной статьи кредитор может выбрать требование долга (частично или полностью) в отношении основного должника.   Обеспечение гарантии     Кредитор, уведомив гаранта дефолта основного должника, может приступить к принудительному исполнению гарантии в суде. Правовое обращение кредитора может быть осуществлено в форме либо приложенного заявления в начале, и затем существенного судопроизводства, либо немедленного начала предметного судопроизводства. После получения окончательного решения кредитор может приступить к исполнению такого решения путем ликвидации активов гаранта, а любые средства, реализованные в нем, будут использованы в отношении непогашенных обязательств кредитора, остаток будет переведен гаранту.   Можно заметить, что иск против личного поручителя должен быть предъявлен в отношении имущества личного поручителя в случае его смерти. Применимое правовое положение, касающееся завещания и наследства в соответствии с Федеральным законом ОАЭ № 28 от 2005 года, регулирует распределение имущества резидента или гражданина ОАЭ. Согласно статье 275 вышеупомянутого закона, кредиторы умершего будут иметь преимущество перед любым другим распределением, за исключением любых расходов на захоронение. Порядок создания обеспечительного интереса и его применения подробно рассматривается в нашей предыдущей статье.   Освобождение из-под залога обеспечения   Большинство незарегистрированного обеспечения, в частности движимых активов, освобождается путем передачи владения активом обеспечения обратно гаранту, но также может быть выпущено с письмом об освобождении и отстранении от кредитора. Для зарегистрированного обеспечения, такого как залог, необходимо следовать процедуре соответствующего регулирующего органа, как указано.   Вывод   Правовые рамки ОАЭ, в том числе законы оффшорных юрисдикций, четко определяют способ, которым должна выполняться гарантия. Хотя интерпретация ограничений может быть темной областью, структура и подход, применимые к гарантийным обязательствам, по сути, ясны. Поэтому, в то время, как гарант должен придерживаться и понимать последствия и результат своих действий, кредитор должен обеспечить избежание любой неопределенности для процесса принудительного исполнения без препятствий.   Как благоразумно объяснил Шекспир в "Венецианском купце", если бы Антонио осознал всю серьезность ситуации, согласившись гарантировать долг Бассанио хитрому Шейлоку, он мог бы избежать приближения к тому, чтобы потерять все!   ]]>Sat, 20 May 2017 11:00:00 GMT<![CDATA[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.

    ]]>
    Sun, 08 Jan 2017 14:00:00 GMT
    <![CDATA[Создание компании в международном аэропорту Шарджи Бесплатная зона: FAQ | Юридическая фирма STA]]> Company Formation in Sharjah International Airport Free Zone (SAIF Zone)

    1. What law established this Free Zone?

    Sharjah Emiri Decree Number 2 of 1995 established both the Free zone at Sharjah International Airport and the Sharjah Airport International Free Zone Authority.

    2. What are the main internal regulations governing this Free Zone?

    Rules and regulations are issued by Sharjah Airport International Free Zone (SAIF) for internal management of the free zone. Any specific regulations governing the governance of company or it's activities are not published on the SAIF website or stated to be applied specifically by the SAIF Authority. Accordingly it can be implied that the Federal UAE laws shall regulate the activities of the companies unlike some Free Zones where internal regulations applies along with UAE laws.

    3. Does this Free Zone have any reciprocal arrangements with other Free Zones?

    SAIF has not publicized any reciprocal arrangements that it could have entered into with other Free Zones in the UAE.

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

    Businesses operating in this Free Zone must comply with several areas of UAE and Sharjah legislations. In general, UAE and Sharjah legislations remains applicable in any area of law such as employment laws, competition laws, intellectual property laws, etc.

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

    The Ministry of Interiors or the UAE Directorate General office guidelines need to be complied with. These relate to admissible nationalities, profile checks, etc.

    6. How does a company set up in this Free Zone?

    SAIF provides a three-step process of incorporation through the Commercial Department, Leasing, licensing and Legal affairs and the Client and Investor Services Department.

    The first step includes an application for license, project provisional approval and document presentation concerning the company's formation, ownership, and management. The second step includes receiving a license, lease agreement and supply of the keys of an office, warehouse, etc. The third step includes receiving a visa, ID card and other such documents required for entry and working in this Free Zone.

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

    Companies within the SAIF zone are one hundred percent exempt from all commercial levies in addition to 100% import and export tax exemption, 100% corporate and income tax exemption. The companies can be 100% foreign-owned along with 100% repatriation of capital and profits.

    8. What can companies set up in this Free Zone do?

    The companies set up in this Free Zone can carry out activities based on the type of licenses obtained by the company (See Question 16 for type of License issued by SAIF). Accordingly, any medium or light industry can obtain license in this Free Zone. By light and medium industry the emphasis is not on size of business but on type of business activity. The company's business activities may include logistics, general trading and such other manufacturing activities..

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

    SAIF allows a broad spectrum of business sectors to operate in its Free Zone. Business sectors include services such as business consultancy, management consultancy, IT consultancy, selective industrial businesses such as trading in oil and gas products, import and export, technical equipment, logistics, warehouse distribution and storage, etc.

    Business set-ups in SAIF are varied in their nature, type and scope of work. However, due to its close proximity to Sharjah International Airport this Free Zone is one of  the largest air cargo hub in the Middle East and North Africa and it therefore attracts trading companies in a large scale.

    11. What inheritance laws apply in this Free Zone?

    Like any other Sharjah Free Zones, matters of inheritance are governed by Federal Law No. 5/1985 that is Civil Transactions Law (the UAE Civil Code) and by Federal Law No. 28/2005 that is UAE Personal Affairs Law. As a general rule, inheritance issues for Muslims are dealt in accordance with Sharia law, whereas for non-Muslims, the law of the deceased's home country can apply in  case a will. Succession under Sharia law principally operates by a system of reserved shares under which shares of inheritance are pre-determined depending on whom the deceased is survived by. As per the Personal Affairs Law No. 28/2005, a non-Muslim expatriate who is resident in the UAE can opt for the law of their home country to be applied to the distributions of its UAE assets through will. However, the option to choose the personal law of home country is not available to Muslim expats as the sharia law will apply to them.

    12. What taxation applies?

    SAIF exempts the companies established in the free zone from all commercial taxes. However as certain activities are allowed only in the Free Zone, customs duty applies when a Free Zone entity wishes to sell their product onshore UAE.

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

    The general rules of UAE Commercial Transactions Law Federal Law No. 18 of 1993 (the Commercial Laws and UAE Commercial Companies law Federal Law No. 2 of 2015 (the federal Commercial Companies Law) for accounting and auditing would apply for companies incorporated in SAIF, as no specific body or authority is stated to be authorized to look into the matter. Further, there is no requirement to file accounts within the free zone if that is not provided by the Freezone authority. However, as a matter of practice, companies are required to provide audited account statements for trade license renewal.

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

    There is no specific provision governing the location of bank accounts in the SAIF Companies Registration Regulation, therefore, the federal Commercial Companies Law applies.

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

    Generally, a Free Zone company may only operate within the Free Zone boundaries and is not allowed to trade directly with the UAE market. However, SAIF Companies and Establishments can sell their products onshore in the UAE subject to the payment of relevant customs duties; hence the same rules may apply for movable property being sold outside.

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

    Three different types of licenses are issued in the SAIF - Industrial licenses, Service licenses, and Trade licenses. The Trade license is further sub-divided into Commercial Licences and General Trading Licences).

    The types of legal entities are Free Zone Establishment (FZE), Free Zone Company (FZC) and branches of local or foreign companies. An FZE would be a single shareholder limited liability company and an FZC would be a multi Shareholder limited liability Company with 2 to 5 shareholders.

    17. Is there any specific ongoing regulation or monitoring of firms operating as particular types of company by this Free Zone authority?

    There is no regulation or monitoring of firms/companies by this Free Zone authority, hence general Commercial and Federal Commercial Company Laws would apply. A case against incorporation of a company in the Freezone, or for liquidation, can be filed with the courts of the Emirate of Sharjah.

    18. How are disputes settled with companies in this Free Zone?

     

    Since this Free Zone do not have separate dispute redressal forum or authority the disputes are settled through the general course of judicial redressal system such as courts, Ministry of labour, etc as they are available for other civil disputes. The exception is when another forum such as arbitration or another original court jurisdiction is agreed upon by the parties in the contract. A case against incorporation of a company in the Freezone, or for liquidation, can be filed with the courts of the Emirate of Sharjah.

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

    A case would be filed with the courts of the Emirate of Sharjah provided no other forum has been agreed upon between the parties to the dispute. If the parties sign an agreement with an express clause on arbitration in Dubai or the DIFC or any other international arbitration centre, the matter shall be referred to that particular forum. However, in case of jurisdictional issues courts of Sharjah will always have discretionary power to adjudicate upon their own jurisdiction if the case if filled with the courts.

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

    The Free Zones may have their own labour law regulations. However, the UAE Labour Law - Federal Law No. 8/1980 (the UAE Labour Law) still applies and governs the rights and duties of an employer and employee working in the free zones. The Labour Law imposes minimum requirements or provisions applicable, inter alia,  on termination of employment, working hours, annual vacation time and safety standards, which applies to the parties even if contracted otherwise as they are mandatory and cannot be contracted out of it. It is provided that an employee should work only for their employer inside the free zone. Accordingly wages can be paid on a monthly, weekly, daily, or by piece basis in any currency with no minimum wage prescribed.

    Employees are entitled to annual leave of two days per month if their service lasts more than six months but less than one year, and a minimum of 30 days paid leave annually if their service exceeds one year. Employees are also entitled to leave with a full wage on all official UAE public holidays, maternity leave of 45 days with full wage and an additional 10 days unpaid, sick leave of 15 days full wage and an additional 30 days at half wage.

    21. How are employment disputes between employers and employees working in this Free Zone settled?

    The role of SAIF is more of a reconciliatory body in nature. It has no judicial or quasi-judicial authority. A complaint can be made by the aggrieved party to the SAIF Authority, however an application is required to be made to the Ministry of Labour office in Sharjah where the parties must then state their issues and arguments before a Ministry representative. After assessing the matter, a representative makes a recommendation. If the parties fail to resolve the dispute as recommended by the Ministry, the matter is referred to the labour court for litigation and a decision is made on the merits of the case as contended before the judge by the parties to the suit.

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

    The investing company and its employees working at SAIF are assisted with their application and in receiving a visa for working in SAIF. The requirements are:

    • The minimum age limit for applying for an employment visa is 18 years and the maximum is less than 60. However special approval can be obtained for the shareholder/managers. The manager of the company's SAIF's operations whose name is mentioned in Trade license.
    • The owner, shareholder and the manager whose names are mentioned in the Trade license, are exempted from the Bank Guarantee. For other employees it is mandatory to deposit with SAIF Authority's Visa & Residence Department Bank Guarantee/Cash Deposit equivalent to one month's salary and a return ticket fare to the country of origin..
    •  The investing company should acquire a Health Card issued by the UAE Ministry of Health for its employees. This requires a medical check-up, obtaining an Emirates ID card, and enrolling in suitable medical insurance. The entire process is facilitated by SAIF
    •  After entering the country, a medical check-up should be done and a report is submitted along with a residence application, within 14 days from the date of arrival to avoid the penalty.
    • SAIF sponsored employees shall work only inside its boundaries.

    23. How are staffs working within this Free Zone registered with the authorities?

    Staffs are registered with the authorities through the guidance of the departments of SAIF in various matters differently.

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

    The UAE Labour Law governs the remuneration and minimum benefits of staff working in SAIF. (See Question 20 and 25)

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

    The UAE Labour Law governs the working time and leave of staff working in SAIF. The maximum allowable working hours for an adult employee is eight hours a day or forty eight hours per week, and is allowed to be increased or decreased depending on the profession and working conditions. However, working hours for the employees of commercial establishments, hotels, restaurants, watchmen and similar operations may be increased to nine hours per day as determined by the Minister of Labour. Likewise, working hours per day in respect of hazardous work or work detrimental to health, may be decreased by decision of the Minister of Labour and Social Affairs. During the month of Ramadan, normal working hours shall be reduced by two hours. Employees may not work for more than five consecutive hours per day without breaks. Every employee is entitled to at least one rest day a week. If employees work on a Friday, they are entitled to an additional 50% of their wage; employees cannot be asked to work two consecutive Fridays except for labourers on daily wage.

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

    There are various zones hence SAIF provides various options depending on the license of company and its business activities. The property and its lease features are:  

    • Offices: office areas start from 24 square meters.
    • Land plots can be taken on a 25 year lease with a minimum plot size of 2500 square meters. Grace period for construction is 6 months.
    • The Industrial Park provides a minimum plot size of 2500 square meter with a grace period of 6 months for construction.
    • The Prebuilt Warehouse is available in four different sizes of 125, 250, 400 and 600 square meters, including an office.
    • A Temporary Warehouse of 600 square meters is available with additional annual charges.
    • SAIF Zone's Labour Accommodation complex includes 82 buildings to accommodate junior staffs.
    • Terms of lease are usually annual with an option to renew for one year.
    • The leased property may not be used except for the permitted use stated in the lease agreement.
    • SAIF also offers the Business Desk Scheme where a company can have a dedicated desk instead of an office for a cheaper annual lease rate compared to that of an office.

     

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

    A company wanting a building permit can acquire it through application to the Sharjah municipality, and by following its rules and regulation. This permit is issued for six months for any construction and modification to an existing facility. The permit is issued against approval of drawings, including an approved and valid site plan, the appointment of a Consultant and Contractor, a Building Completion Certificate, and the application of a Building Permit along with valid licenses of Contractor and Consultant, contracting agreement, , and original receipt of security deposits. The Responsible department in Sharjah Municipality is Building permit section -  Al Nasiriya. Further information about this process can be obtained on the website of the Sharjah Municipality.

     

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

    Construction companies building in this free zone must comply with all health and environmental standards as set out by the Sharjah Department of Town Planning and Survey (DTPS) as per the Environment regulations. Companies must also comply with the Sharjah Building Code in the construction of their facilities. DTPS advise builders on the use of land, height of buildings, parking areas, loading and unloading points in industrial areas, and locations of petrol stations, commercial centres and other projects. Sharjah Municipality looks into the requirements regarding the number of storeys in a building, minimum space inside rooms, ventilation, lighting, exit and entrance points, passages, elevators and allied aspects.

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

    Only companies incorporated in this Free Zone are allocated land or other property on a lease.

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

    The standard terms and conditions of the use of utilities are included in the lease agreement with the rental charges including any utility charges which are usually standard however may differ from party to party on the basis of the type of property leased such as warehouse or office, etc

    31. How do retail premises establish themselves in this Free Zone?

    The rules and regulations specifically governing retail premises are not set out on the website or on any form. However, the brochure specifies restaurants as business activity under any of three license hence it is implied that there is no restriction or any rule specifically relating to retail establishments operating in this Free Zone. Therefore, the same procedure for establishing or incorporating would apply as any other type of business activity.

    32. Is it possible for hotels to operate in this Free Zone - how do they establish themselves?

    There are no specific rules regulating hotels operating in this Free Zone. Hence it would seem that no restriction is imposed on hotel operations. Therefore, the same procedure for establishing or incorporating a company would apply as any other type of business activity.

    ]]>
    Thu, 10 Nov 2016 12:00:00 GMT
    <![CDATA[Upsurge of IPOs in the UAE: Legal Involutions ]]>"In a world that's changing so quickly, you are guaranteed to fail, if you do not take any risks"                    
                                                             Mark Zuckerburg (before facebook IPO)   Introduction   The transitions to a public company is a very important development in the history of companies and the next major step in the evolution of any private company, not to mention its role in the deepening of capital markets. The Initial public offering (IPO) launches an immense growth for any company. However, the procedures involved are rigid and require strict due diligence pre IPO and post IPO. Materialization of new listings in the United Arab Emirates (UAE) is however not that efficacious despite the country's market rallying at or near the fastest pace in the world. According to the latest survey , the Dubai Financial Market General Index is up 126.8 per cent in the past year, with Abu Dhabi Securities Exchange Index rising 69.7 percent. The IPO extends substantive capabilities to the public company in terms of growth and development, or in terms of dedicating the concepts of transparency governance and effective management.   Experts are saying that long awaited changes in commercial laws of UAE are boon to the UAE market. UAE economy aims to compete with global standards and ensures transparency in the system with a view to sustain a global economy in this competitive world. To attract more foreign investment in the country this was a need of an hour. The commercial companies law (Federal Law No 2 of 2015) has diversified the avenues.    The main aim for passing UAE Federal Law No (2) of 2015 is to enrich and diversify the UAE economy in order to compete on a regional and global  level, and to enhance the way in which commercial companies operate in the UAE. The idea is that greater transparency and clarity in the system will naturally result in an increase in investor confidence in the UAE market, the ultimate objective of which is to attract a larger volume of foreign investment into the UAE.   The recent proposed change to the UAE companies law will penetrate the IPO market. Under the new companies law, the percentage of ownership that must be sold in an IPO will be cut to 30 per cent from 55 per cent. This is a hindrance for companies going public in the UAE and companies which are looking for massive expansion of their activities are opting for other exchanges in the world, for instance London stock exchange being the most preferred option for the companies in UAE. Recently the big names have come up with their IPOs like Damac holding, a top developer in the UAE which listed their shares on London Stock Exchange. Even Emaar is considering its first issue in the near future. One Abu Dhabi based company has also planned to sell shares on the London Stock Exchange to feed its expansion.     Another constraint under the local listing is regarding the pricing of shares. There is a lack of flexibility for owners in structuring sales as shares are to be priced at a par value of Dirham 1. As per Emirates Securities and Commodities Authority (ESCA) guidelines 2, 45 percent of the shares need to be subscribed by founders before the remaining 55 percent of the shares are offered to the general public via IPO.   Regulatory framework of IPOs - local listings   In the UAE, there are three stock exchanges. Abu Dhabi Securities Exchange (ADX) lists mostly local UAE companies and NASDAQ Dubai deals in the trading of international stocks. The two stock exchanges namely DFM and ADX fall under the regulation of Securities and Commodities Authority (SCA) which is a governing body and both stock exchangs have to comply with the standards of SCA. SCA is a watchdog authority to protect investors', brokers' and listed companies' rights.      Similarly, Dubai Financial Services Authority (DFSA) is the governing authority of NASDAQ Dubai which follows the international standards of listing on the similar lines as of EU norms. In line with the international regulatory framework, a listing on NASDAQ requires certain formalities, however the rules and regulations purported are to be favorable and intuitive and close to the DFSA objectives. The Markets Law 2012 3  and the Market Rules came into force in 2012 after a public consultation process and based on the rules published by Financial Regulation Authority, United Kingdom. A company formulating an IPO would require establishing a concurrent dialogue with both the DFSA and NASDAQ Dubai. The most essential document which sets out all the details and terms of offerings is the Company's prospectus. A requirement that the company must have a market capitalisation of at least USD 10 million and that it must normally list at least 25% of its shares 4 .   Conclusion   In the view of above, the UAE is expected to be a very strong market for IPOs this year. The policy makers are keeping a liberal view and expecting the positive growth of the market. According to a new report from Ernst & Young, capital raised in the country and the wider MENA region saw their highest levels since 2008. 23 IPOs in the region raised USD 3 billion last year marking a 64% increase in terms of volume when compared to 2012 5 . Three IPOs from the UAE, including Al Noor Hospital, DAMAC Real Estate Development and Action Hotel, secured over USD 740 million from foreign listings on the London Stock Exchange .6  ]]>Wed, 09 Dec 2015 12:00:00 GMT<![CDATA[Share Pledge for Commercial Facilities ]]>

    Diageo, a company more commonly associated with alcoholic beverages Smirnoff, Guinness and Johnnie Walker in the United Kingdom- held almost 27.8 percent stakes in a company called United Spirits Limited, one of the leading spirits company in the Indian market by volume.  A series of share pledges by United Spirits Limited in favor of banks for raising capital later resulted in the stake of Diageo being raised to be more than 57 percent. 

      A fierce and debatable subject which can be an interesting case study on the subject of share pledge is the story behind United Spirits. United Holdings pledged shares of the company United Spirits to raise funds for a distressed business. As it now holds, the bank decided to recall the loans given to Kingfisher Airlines by selling part of the collateral - the shares in United Spirits.    In a more structurally advanced legal system, share pledges have evolved as means of fund raising for businesses. In the United Kingdom for instance, a 'floating charge' can be created over the assets or shares of a company. Such a form of security is created in assets which are not constant. The security interest therefore floats over funds. Commercial companies or limited liability partnerships agree for events that trigger crystallization of 'floating charge'. Once the floating charge has crystallized due to occurrence of event of default, the owner can exercise his rights over the assets.   Countries like the United Arab Emirates are one of the most sophisticated economies in terms of the transactions they witness between the fine print.    Legally speaking, the region has evolved from the stages of infancy to that of toddlerhood. As such, it would be interesting to understand whether the United Arab Emirates in fact recognizes the concept of share pledges as collateral security for fund raising or not.    Within the UAE, there are at least six different types of mortgages or securities depending on the nature of collateral, pledge being one of the kinds. Before discussing the effectiveness of pledges, let us understand what kind of assets qualify as security and could create on what is known as 'charge'.   UAE Civil Code defines immovable property as something which has a permanent fixed nature and may not be removed without damaging or altering its structure. Movable property is therefore anything but immovable property. In terms of movable property, a further sub classification exists, i.e., tangible and intangible. Goods, cash, machines and related are tangible. Intellectual property, capacity to contract, debts, licenses and shares are intangible.1    Let us now take into consideration the concept of share pledge. Shares are part of a commercial business and covered under Article 39 of the Commercial Transactions Law. The general rules relating to a 'movable' property by definition are not necessarily applicable to 'commercial businesses' although it is classified as movable. Pledge by definition means the actual parting away of or delivering of possession from the pledgor (mortgagor) to the pledge (mortgagee). However, pledge within commercial businesses does not follow this rule. In commercial businesses, the mortgagor may continue to enjoy possession of the commercial business.    Article 49 of the Commercial Transaction Law states that pledges in commercial businesses can only be created in favor of banks and not other lenders. In order for a pledge to be valid or effective against third parties, it must be recorded in writing at a registry along with particulars of the pledge to be well specified in such recording documents- the deed of pledge.    Based on the definition of pledge, lenders have been careful in creating share pledges in the UAE especially given the fact the most common form of company- an LLC does not involve issuance of nominal or bearer forms of shares. A nominal share is one where the name of the registered shareholder appears on the share certificate, while bearer form of shares do not have a name appearing on the share certificate. Therefore the transfer of rights or shares for nominal shares is effected by a share transfer deed. In case of the bearer form of shares, such transfer can be effected by physically handing over the share certificate custody to the pledgor.    With the amendment to the Commercial Companies Law, the complexities surrounding the aforesaid have been resolved to great extent. Article 79 of the amended law provides that: 'a partner may transfer or pledge its shares  in the company to another party or third party. Such transfer shall be made in accordance with the terms of the MOA of the company under an official document in accordance with the provisions of this law. Such transfer or pledge shall not be valid against the company or third parties until the date of its entry in the commercial register with the competent authority' In light of above, it is inferred that as long as the pledge can be registered on a commercial register- maintained by the regulating authority of a free zone, the economic department or the stock exchange regulators- the pledge will be considered valid and enforceable.

     

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    Thu, 03 Dec 2015 12:00:00 GMT
    <![CDATA[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[RE-MEDIA-L?]]> Control of the Media in UAE Law

    If the head of STA was to look at the internet tabs open on our computers right now he'd wonder if we had done any work today, with Facebook, BBC News, The National, Buzz feed, the Financial Times and various national publications from around the world all featuring on our title bars. Fortunately (and for once) I have an excuse – each and every one of these websites falls within the category of "media", which is the focus of this article. Well, "media law" specifically, but I'm hoping he won't probe in too much detail.

    So, where should we start? As we have discussed in previous articles, there are several limbs to every legal practice area, niche or otherwise, and each area may be governed by its own separate set of rules and regulations. Therefore in the interests of saving both paper (see our recent piece on the environment and construction waste) and your time we shall concentrate our attention on one specific area – namely "how is the media controlled by law in the UAE"? Yet in order to do this we should first consider the basic definition of media in accordance with the law. In the USA, the First Amendment to the Constitution refers to the media as the "gathering, publishing and distributing of information and ideas". In Europe, the European Convention on Human Rights cites the "receiving and imparting of information and ideas", and goes so far as to specify the inclusion of broadcasting, television and cinema. In the UAE… And this is the problem. In the UAE there appears to be an inherent lack of law pertaining to the media. Or no up-to-date law, at least – which is a glaring omission in a global society which is creating so many new media platforms on a daily basis that our brains and electronic devices often struggle to process them all. The fact that revisions to the existing legislation were suggested in 2009 and again in 2013 implies a national acceptance of the inadequacy of the current provisions, but no proposed drafts have as yet been incorporated into law.
    So
    what of the current position – how is the media controlled by law at present, and what reforms do the 2009 and 2013 propositions and subsequent debates suggest are needed? Perhaps the most obvious element of discussion that will come to mind when combining the terms "media" and "control" in a sentence is freedom of press – namely, the freedom to publish information, ideas or opinions without suffering repercussions. This is by no means a new area of discussion, with international phenomenon's such as the British privacy injunctions controversy of 2011 still fresh in the minds of many. Cases such as that of ex-F1 boss Max Mosely and News of the World before the European Court of Human Rights characterize the nature of the long-standing deliberation: which should prevail – the right to privacy,

    Or the right to free speech? Of course, our avid readers will be aware that Volume I Issue VI of Court Uncourt included an article on defamation, which carried a full analysis of the UAE's position with regards to this debate and outlined the fact that the publication of potentially defamatory material can result in severe consequences, particularly if the means of publication is via the press. In pursuit of avoiding repetition we won't go into too much detail here, save for to say that Articles 372 and 373 of Federal Law 3 of 1987 (the Penal Code) respectively provide that "whoever attributes to another person, by any means of publicity, an incident which makes him liable to punishment or contempt shall be punished by detention for a period not exceeding two years or by a fine not exceeding twenty thousand dirhams" and "detention for a period not exceeding one year or a fine not exceeding ten thousand Dirhams shall be imposed upon anyone who, by any means of publicity, disgraces the honor or the modesty of another person without attributing any particular act to the defamed party", with the additional clarification that "if libel is committed by means of a publication in any of the newspapers or other printed media, it shall be considered an aggravating circumstance."But what other legislation provides any rights or restrictions with regards to the media's freedom of speech? There is a plethora of guidance on the "media" in general, with Federal Law Number 7 of 2002 dealing with copyright, Council Decision Number 35 of 2012 regulating advertising and Cabinet Decision 14 of 2006 controlling the National Media Council – but the law appears to remain silent on actual media content. The only provisions of strict relevance, then, seem to be those of the Penal Code. It therefore seems reasonable to assert that the current law does not promote freedom of press insomuch as it highlights restrictions of press. As UAE media law expert Dr Matt J. Duffy suggests in an article published by Gulf News on 23 March 20121 , it would appear that the present law restricts what the press can do, rather than offer any protection over what it may do.
    In an amalgamation of the foregoing, head of the National Media Council Sheikh Abdullah bin Zayed announced in 2013that in a poll analyzing the freedom of expression afforded to media and the consequential punishments, the UAE ranked 158th out of 196 countries. Evidently this is an exceptionally poor placement, especially when considering the fact that the UAE is accustomed to topping the league table in the majority of positive surveys in which it takes part. However, Sheikh Abdullah qualified his announcement with the explanation that the poll considered only the legislative position – not the actual practice of a country. Therefore the fact that journalists and other media professionals are not expressly protected in law does not automatically mean that the UAE deals out harsh punishments to any such person exercising his right to free speech. Still, the point remains that in order to both improve its ranking and provide clearer guidance to the press, the UAE must establish a definitive and up-to-date law with regards to the media.

    It is worth noting here that almost every law in every jurisdiction is developed in accordance with the country's culture, history and values, often in accordance with precedent emphasizing the need for such legislation. Accordingly, any media (or indeed, any other) law implemented in the UAE would need to bare such factors in mind. As Dr Duffy states in his aforementioned article, we could not simply lift one country's media laws and bring them into force in the UAE – any law introduced here would need to pay respect to the presiding social and cultural customs. A good starting point may therefore be the Content Code (the Code) of Abu Dhabi's Media Zone Authority (MZA) as issued in 2011. On acknowledging the influential capacity of the media, the Code emphasizes that caution should be exercised (an industry-specific application of the wise words of Spiderman's Uncle Ben – "with great power comes great responsibility") and outlines the importance of preserving the nation's ethos by stating as a Key Principle that "The Code recognizes the importance of balancing freedom of expression with a duty to take account of the cultural and social expectations of society".


    An initial understanding would therefore give the impression that the Code strikes a reasonable balance between the UAE's constitutionally- enshrined right to free speech and its national values, such as privacy. Yet in reality it is likely to be the case that many matters fall into the grey area between the two principles, whereby publication of the story would breach the privacy of the protagonist, but prohibition of publication would be inconsistent with the publisher's right to free speech. As discussed in our article on defamation, in these circumstances many European courts have applied the test of public interest – namely, is it in the interest of the public to know the cited information? In light of the UAE law's silence on the issue, the Code requires that the publication of controversial material meets its standards of "Editorial Justification". Outlined in the "Definitions" section, Editorial Justification is "the reason the licensee has made and disseminated the content". The Code goes so far as to specify that anyone considering the justification of releasing information into the public domain should consider factors including the artistic and creative merit of the contents, whether the information is beneficial to the public (for example, whether it is in the interests of public safety or exposes injustice) and whether the information can be proven as factually accurate.

    Of
    course, this guidance is without limitation, and there are no cast-iron rules or examples in place controlling the content of published or broadcasted material. The Code's Editorial Justification therefore leaves scope for the application of the publisher's discretion. Yet it goes without saying that certain considerations are mandatory, and the Code therefore lays down express rules with regards to aspects which must be taken into account. For example, Rule 2 regulates content which has the potential to cause harm or offense, with material such as that which is violent, sexual, discriminatory, distressing or inclusive of explicit language confined to instances whereby it is contextually

    justified. Moreover the Code requires that clear warnings precede any potentially harmful or offensive content. The protection of children from any age-inappropriate material is also paramount pursuant to Rule 1, as is the insurance that crime, public disorder or anti-social behavior are not expressly or inadvertently encouraged (Rule 3).

    In addition to regulating content, the Code goes so far as to offer guidance on the conduct of media-based entities. Rule 5 requires that the dissemination of all forms of news are reported impartially and with factual accuracy, with Rule 6.1 clarifying that editorial bodies have the responsibility of ensuring that material facts are not presented, edited or omitted in such a way that is adversely unfair on any party. In addition to paying respect to the aforementioned provisions of the Penal Code, Rule 7 (pertaining to privacy) introduces provisions prohibiting the intrusion of any electronic devise, such as email or mobile phone communications (Rules 7.2 and 7.4). Although such guidance must be read in conjunction with the applicable legislation, these rules go some way towards demonstrating the way in which the Code would provide a strong foundation for an up-to-date media law consistent with the requirements and risks of modern society.

    In the same way that this is by no means an all-inclusive summary of the Code, the topic of the freedom of press is not the full extent of "media control" in the UAE. It is not only the publication and/or broadcasting of media content that is subject to regulation, but also the governing and ownership of the media entities themselves. Pursuant to Article 2 of Federal Law Number 15 of 1980 (the Publishing Law) the owner of a printing press must be a qualified UAE national without any criminal convictions. Likewise, as per Article 25, the owner of a newspaper must also be a qualified UAE national in excess of 25 years of age, free from convictions and not under the employment of any public service or foreign agency. Evidently separate provisions are in place with regards to entities established in free zones, and locations such as Dubai's Media City, Internet City and Knowledge Village would be viable options to any foreign investor wishing to partake in the media spectrum. Here, and in accordance with Council Decision Number 1 of 2006, licenses are available not only in the publishing segment, but also in the TV and radio broadcasting industries.

    Yet regardless of the field, licensing type, current law and location within the UAE, the fundamental principles of the media industry remain the same. Any players within the media and broadcasting game should therefore proceed with caution when balancing their rights alongside the underlying values of the nation. As philosopher John Stuart Mill observed, "the individual does have the right of expressing himself. So long as he does not harm others".

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    Wed, 27 May 2015 12:00:00 GMT
    <![CDATA[SAFEGUARDING UNPAID CREDIT LOAN]]> The payment of debts is necessary for social order. The non-payment is quite equally necessary for social order. for centuries humanity has oscillated, serenely unaware, between these contradictory necessities.

    Simone Weil

    The need to restore capital buffers in the wake of 'bad debts' forced more than one British bank (s) in the United Arab Emirates to wind up their partial operations. On similar notes, the acquisition of subsidiaries of internationally stable investment banks within this region on account of dwindling profits can be again attributed to 'bad debts'. The investment climate in Dubai has always been inviting yet seldom predictable.

    As a layman, the sight of abandoned fancy cars at reserve car parks and tales of unpaid credit card dues of colleagues' friends do not appear alien to those who have been part of this robust economy in any way. While the United Arab Emirates has enjoyed an image of being a safe haven, it has often been slammed with comparisons to a cab where you enjoy the ride until you pay as per the meter.   Perhaps a sharp comparison to the above idiom would be the times before the global economic crisis, when things were right and the jaunt was continuing. Banks granted credit cards without the need of exhaustive preventive sureties. Personal loans and investment offers were on a rise. While the rationalists enjoyed the privileges of multiple credit card deadlines as means of managing personal finances, these multiple credit lines for defaulter led to registration of absconding cases and non-traceability even before an alarm could be raised.

    One would question the know-your-client capabilities of the lender and debate how a defaulter from one bank in UAE was able to obtain another facility from a different lender. In the respect, the challenges faced by the banks have been many. Primarily, there was a lack of legislative provisions for KYC guidelines and secondarily a centralized credit control board never existed. The modus operandi was based on 'profits maximization module' rather than a 'pre-emptive module' arising out of streamlined nexus between the lenders.

    Unlike the United States or the United Kingdom, the concept of 'credit history' has been quite restricted in UAE. In US, every time you apply for a loan or accepted credit from a bank, your bank would pass on details of your accountability in paying back credit to a central board which will then create your credit history. So when you apply for a credit facility with another lender, he is able to access your credit history for your past transactions. In UAE, the only concept of credit history has been a salary certificate confirmation as most of the banking information is not shared within the public domain. The effects of bad debts and piling loans on banks therefore became detrimental for UAE's financial sector.

    In a move to regulate the credit environment and overcome the above challenges, the United Arab Emirates issued Cabinet Resolution No. 16 of 2014 Concerning the Executive Regulation of the Federal Decree Number 6 of 2010 in regards to credit information (the Law); establishing the Al Etihad credit Bureau (AECB).

    AECB, the first nationwide credit control agency in UAE has become operational in the last quarter of the year 2014. It has collated 24 months of data from almost 70 banks as well as other credit data providers like telecommunication agencies and other government bodies across the UAE. Initially the byelaws for the AECB provided that only federal and local entities, investment companies, financial institutions, leasing companies, professional establishments, cooperative societies and branched of foreign companies registered in UAE may obtain the credit information from AECB by making an application. Later, provision was made for individuals to obtain their credit report by payment of a nominal fee of AED 110. Therefore, all the entities named above will be in a position to benefit from the database of the AECB.

    The concept of control bureaus or credit control agencies, although new to UAE, has been a long awaited step by lenders and borrowers alike. The report provided by AECB will include information regarding defaults in payments, refusal or any decisions issued against the person. The report will not issue information on mortgaged assets value, investments value or any other such information that is not requested by the applicant. AECB operations are specific to providing details of the credit community for individuals. However, this will extend in due time to provide information and credit history of local companies, cheques bounced by these companies and so on.

    Without doubt, the establishment of the credit control bureau will be a blessing for the banking sector enabling them to analyze the burden of over lending and the same time minimize the risk associated with lending.

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    Wed, 13 May 2015 12:00:00 GMT
    <![CDATA[Zooming In On Public Health Institutions]]> Corporate Governance In The UAE

    "When it comes to health, your zip code matters more than your genetic code.

    &Dr. Tony Iton 

    when one thinks of a hospital, the image that pops up in one's head is that of doctors, emergency rooms, operating theatres and ambulances. What we fail to recognize is that for all of these elements to come together and provide effective medical treatment, it is imperative that the hospital is properly managed. A hospital is not just a medical institution but also a business and it will or should have a corporate structure in place. Hospitals and health systems across the world are constantly struggling with issues of governance, especially in the aspects of standardization and quality improvement. It has been difficult to establish clear channels of communication and clear lines of accountability for the innumerable committees, departments and business functions in a healthcare environment. This can certainly result in poor standards of care towards patients. What is compulsory for the efficient governance of hospitals? It is necessary for there to be an effective use of funds, professional and competent management and streamlined governing and reporting structures. By establishing and maintaining the public's trust, being good stewards of the community's resources, and ensuring high quality care Hospital Administrators can be an important asset on the governing board in fulfilling those duties.

    Administrators add the perspective of the patient care process as well as a unique understanding of family issues; they grapple with overall health care concerns such as staff shortages, patient safety and quality of care; and they are the most knowledgeable about diseases and new treatment modalities, as well as
    being aware of the ethical dilemmas posed by new technologies. His Excellency Sultan Bin Saeed Al Mansoori, the UAE Minister of Economy, has called for institutions to embrace corporate governance as "an institutional capacity, rather than a regulatory requirement".

    Let's take a look at a few example of countries where such principles have been embraced in the systems of governance in medical institutions. The Healthcare Governance & Transparency Association (HeGTA) is an Egyptian non-governmental, non-profit organization founded in 2012 with the vision of promoting governance and transparency in the healthcare sector, in order to enable healthcare reform and to create investment opportunities. HeGTA aims to contribute to a healthcare system which is based on accountability, equality, fairness, efficiency and quality by the creation, pooling and dissemination of knowledge. Similarly in the United States, the U.S. Agency for International Development (USAID) is an independent federal government agency that receives overall foreign policy guidance from the Secretary of State. Its work supports long-term and equitable economic growth and advances U.S. foreign policy objectives by supporting agriculture and trade, global health, democracy, conflict prevention and humanitarian assistance.

    Governance is important work, and how well it is done has significant consequences for health care organizations, the communities they serve, their patients, medical staff and employees. A technology is a set of principles for solving problems and seizing

    opportunities. A key element of the public sector is that services are provided for the public good, suggesting that the public sector may have a higher sense of purpose in what it does than the private sector. Another difference lies in the fact that people who use public services may not be 'willing customers' – as may be the case with health care. Hospital governance is based on the two pillars of accountability and transparency. As the provision of health care is a 'social good' each group of stakeholders merit recognition. Resources are one of the most pressing issues in hospitals. Issues such as value for money, the reorganization of the health service and patient satisfaction has served to drive the governance process forward. International organizations like Joint Commission International, which is a US-based body, are now in place to award accreditation to institutions based on their compliance with various international standards. However these not only assess elements such as patient care and medical standards, but also consider systems of corporate governance and management.. Therefore such schemes would appear to have put governance on the agenda of the health service and hospitals in particular across the world.

    Currently the prevailing conditions in so many hospitals in the UAE are the subject of discussion in terms of the management and facilities being provided. This may well be as a result of the fact that there is as such no regulatory framework available for the governance of public health institutions. However health institutions are supervised by the health authorities and there are provisions for internal committees, such as committees for ethics and compliance, wherein an employee can lodge his complaints against the management or report any mishaps in the system as a whistleblower. Moreover in a region with a low percentage of listed companies and a high percentage of family businesses, a lack of regulation cannot be seen as an excuse not to adopt a formal corporate governance framework.

    In order to reach this level of integrity and reform, some structural solutions need to be taken into consideration. Research and interviews reassured the idea that the most promising way to solve current grievances is the implementation of governance. If leveraged upon, the efforts for a promising solution to do this have the potential to create unparalleled success in hospitals. It also bridges the gap between the social and humanitarian mission of the hospital on one side, and its organizational nature on the other.

    According to the Millennium Development Goals access to basic health care is central to the poverty reduction worldwide. Hospitals constitute a very significant part of the overall health care sector and they provide essential services to the public.

    ]]>
    Mon, 04 May 2015 12:00:00 GMT
    <![CDATA[Закон о Запрете Фронтирования в ОАЭ]]>Совет) опубликовал Федеральный Закон №17 в 2004 году (Закон № 17), касающийся Закона о Запрете Фронтирования, который запрещает использование побочных контрактов или номинальных соглашений с гражданами ОАЭ. Закон №17 гласит, что «фронтирование» находится под запретом и оно определяется как «предоставление права иностранному лицу – физическому или юридическому – предпринимать любую экономическую или профессиональную деятельность, которую он не имеет права осуществлять по законам ОАЭ». Впоследствии Совет выпустил резолюцию кабинета в 2007 году, и эффективное принятие закона не вступило в силу до 2009 года. В отсутствие дальнейших пояснений от Совета, остается неясным являются ли положения Закона №17 эффективными на сегодняшний день.   Несоблюдение положений Закона ОАЭ о Запрете Фронтирования влечет за собой штраф и уголовную ответственность за повторное нарушение. Важно отметить, что санкции, указанные в Законе №17, относятся ко всем сторонам побочных контрактов и номинальных соглашений. В прошлом они именовались по-другому – соглашение, соглашение о займе, соглашение о займе и управлении, соглашение номинальных акционеров, или договор о намерениях, но по сути все эти договоры служат одной цели и идут вразрез с Законом № 17.   Грамотная, профессиональная консультация и совет юриста в данном случае имеют большое значение, чтобы убедиться, что договор не является нарушением Закона №17. ]]>Sat, 25 Apr 2015 12:00:00 GMT<![CDATA[IN IT TOGETHER]]> COLLECTIVE INVESTMENT SCHEMES:

    SKYLINING DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC) LAW

    "The first step towards getting somewhere is to decide that you are not going to stay where you are."

    Investments require one to take a risk and it is often advised that this risk should be a calculated one. According to K Geert Rouwenhorst in The Origins of Value, the concept of an investment company dates back late 1700th century Europe, when a Dutch merchant and a broker invited subscriptions from investors to form a trust, thus providing small investors with limited means an opportunity to diversify1 . With the pace of economic transitions worldwide, the approach of investors has also varied enormously. The availability of different opportunities to make money and the competition in the market inevitably have the scope to create confusion. However, there are many options which allow a person to make comfortable investments in anticipation of easier returns. In the UAE, the Dubai International Financial Centre (the DIFC) offers an optimal environment for making investments and has been regarded as one of the most developed frameworks in the world. It is based upon the principles of common law and tailored to the region's specific need. Economists expect the investment market in the UAE to remain steady and thrive. This should encourage investors who are looking to add risk to their portfolios at present, ahead of the lean summer period. In this article shall discuss the flexibility and operations of Collective Investment Schemes (the CIS) which can be established in the DIFC – an onshore financial and business hub connecting the region to the world, and the world to the region.

    The DIFC was established by Federal Law and is regarded as an autonomous jurisdiction within the UAE. Funds are regulated by the Dubai Financial Services Authority (the DFSA) which is an independent authority responsible for managing and distributing the funds. As the name itself denotes with regards to the concept, CIS are the collection of money from different investors, pooled to create an investment fund. The concept of CIS is considered as a secured investment opportunity because each scheme will have a specific objective, projected target return and risk profile which is generally set out in the proposition document. CIS are more or less similar to mutual fund type of investments, insofar as that they provide absolute control over the investment from the company pooling to the investing the money. The recent economic downturn around the world has made this need more pressing. One of the considerable advantages of investing in a CIS is that it is a type of passive investment, and one does not have to actively watch every financial transaction that takes place. You can simply opt for a good scheme and let the fund manager take care of the rest. If you choose an effective scheme in which to invest your money, you can be sure to look forward to some potential and consistent returns. Although a CIS can be very profitable in certain situations there are a few elements of which a potential investor should be cautious. One of the potential drawbacks of this type of investment is that there is certain fees payable in order to subscribe, in addition to the fund, a management fee other variable hidden charges. Such fees can significantly eat into the returns that are generated by the investments. Therefore an investor should pay careful attention to the performance of the fund and make sure that it justifies the fees necessitated. If the fees get too high, a fixed-rate investment with a low interest rate pay be a more suitable option2 .

    REGULATORY ASPECTS OF CIS IN DIFC The DFSA introduced the first Collective Investment Fund regime (the Fund Regime) in the year 2006. This was designed to provide adequate investor protection, meeting international standards for regulation. However in 20103  certain remarkable changes were implemented into the Fund Regime in order to make it more accessible and market-friendly, and moreover to ensure that greater respect was paid to the principles of the International Organization of Securities Commissions (the IOSCO) for regulating the CIS. The Fund Regime focuses on disclosure, corporate governance, valuations and service providers. The DFSA takes into account a range of matters when licensing and supervising firms that manage and market funds in or from the DIFC.
    The DFSA also regulates the key players in the funds management service sector, such as fund administrators, asset managers, custody providers and trustees, in order to ensure adequate investor protection by promoting high industry standards that meet international best practice. The investments of funds is made by specialized management (directors or the managers) and can consist of securities, bonds, and other financial instruments. It accumulates funds of high net worth in a collective scheme, which is flexible, with minimum regulatory supervision. CIS may be used as investment vehicle for property investments.

    KEY FEATURES OF THE FUND REGIME

    1. Objective

    The Fund is the collection with respect to property of any description, including money, and enables those taking part in the arrangements (the Unit Holders) (whether by becoming owners of the property or any part of it, or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property, or sums paid out of such profits or income. However the arrangements is such that the Unit Holders do not have day-to-day control over the management of the property irrespective of their rights to be consulted or to give directions.

    2. Requirement of Funds

    A fund can be established in the DIFC either by becoming: (a) a DFSA licensed Fund Manager; or (b) an External Fund Manager.

    3. Types of Funds

    There are two types of Funds that can be established in the DIFC, and be managed by either a DFSA-licensed Fund Manager or an External Fund Manager (DFSA licensed fund managers being able to establish and manage funds in the DIFC, as well as in jurisdictions outside the DIFC)5 :

    Public Funds:   These funds are open to retail investors, and can be marketed by way of public offer. As Public Funds are open to retail investors they must abide by stricter regulatory requirements so as ensure the greater protection and transparency to the retail investors. The requirements honor the principles of IOSCO and meet international standards for retail protection. Detailed disclosure is included in the fund's prospectus to enable retail investors to make an informed investment decision relating to the fund, and an independent oversight of the fund management is provided either by a member oversight committee or by the Trustee or Eligible Custodian of the Fund.  

    Exempt Funds:   Exempt Funds replaced the existing Private funds regime, and are open to professional clients who make at least a minimum subscription of $50,000 (US Dollars fifty thousand) each. Such Funds can only have 100 or fewer Unit Holders and cannot be offered to the public, with distribution being only by way of private placement. They are subject to lenient regulatory requirements

    4. Fees of Funds

    In the recent regime the range for marketing of Foreign Funds in or from the DIFC has been expanded. The Fee structure has been made more competitive as the fund manager application fee reduced from $40,000 (US Dollars forty thousand) to $10,000 (US Dollars ten thousand).

    5. Other Requirements

    For obtaining a DFSA license, the fund manager has to demonstrate the adequate systems and controls necessary for the management of the type of proposed fund. The individuals performing certain functions within the Firm, such as its Board Members, senior management and key control functions (for example, the compliance and anti-money laundering officers) meet the relevant suitability and integrity criteria. Once the license has been granted, the DFSA supervises the fund manager's activities on an ongoing basis. In order to comply with the best international practices the funds must have a registered auditor who is required to prepare a report on the financial accounts of the Fund on an annual basis. A Fund Manager is obliged to provide interim and annual reports to Unit Holders and the DFSA. The annual reports must include a valuation of the fund assets which is acceptable to the Fund's registered auditor.

    CONCLUSION

    Investment in CIS is voluntary and requires for there to be a sufficient number of citizens with surplus savings to support the same in order for them to remain viable and effective. Additionally, because of the requirements for diversification and the need for liquidity to accommodate regular injections and outflows of money, CIS require relatively highly developed stock, bond and money markets to provide an adequate range of investable securities. Therefore such schemes are more common in developed African countries, where higher levels of disposable income for discretionary savings are available. Nonetheless, the introduction of new structure in DIFC fund regime is a fair indication of Dubai's inclination to emulate with major global fund domiciles such as Luxembourg and the Cayman Islands, and of the DIFC's commitment to adapting to market demand. The regime is sufficiently light to be attractive to fund managers from various aspects, but simultaneously ensures that investors are being given greater protection through a robust regulatory framework.

    Coming Soon…

    Like what you've seen? Then come and meet the team!
    Are you a company or an individual looking for assistance in corporate, commercial or litigation matters? Do you enjoy STA's newsletter updates? If so then STA may well be the firm for you. Still looking for that extra little bit of reassurance…?
    Over the past year STA has gone from strength to strength, and has enjoyed a period of unprecedented growth. New and widely-publicized office openings in Doha and Bahrain added pins to the map, whilst the growth of our team in the UAE has allowed us to extend our expertise across a wider range of practice areas.
    As well as expanding as a firm STA has also grown as a brand. Your trusty legal publication Court Uncourt is now circulated more widely than ever before, and we were delighted to appear on renowned television series Property scape. With our associates featuring regularly on weekly radio show Josh Magazine to discuss a variety of pressing legal issues, it is no wonder that an increasing number of people are associating the name "STA" with high-quality legal advice and seamless counsel.
    Yet STA is proud of its growth beyond that in the physical sense. Our careful yet open and organic expansion has resulted in a larger client base, and our increasing capabilities are such that we are now able to go further towards fulfilling our clients' specific needs. Our bespoke service and core strengths now extend to over thirty varied practice areas, each being specially structured in order to meet your current legal needs, whilst at the same time preparing for the future by taking into consideration your commercial objectives and long-term business plans. However we understand that the needs of a company extend far beyond the legal, and appreciate the way in which entering into suitable synergies and commercial relationships may take a business to new heights. With this in mind, why not combine the opportunity to meet STA with the chance to interact with other companies and corporate bodies?
    In the interests of introducing ourselves properly and presenting our existing and prospective clients with the opportunity to network so as to expand their business portfolios, STA shall be hosting its first corporate event in 2015. Scheduled to take place in Abu Dhabi, STA will host representatives of commercial entities from across the globe. The evening shall include presentations on prevalent legal topics with STA's trademark unique twist, along with further information about the firm, thus allowing you to make an informed decision as to your next legal representatives.
    Still not sure? How about this: we'll provide appetizers.

    ]]>
    Fri, 06 Mar 2015 12:00:00 GMT
    <![CDATA[Руководство свободной зоны ОАЭ 2014-2015]]>

    Particulars JEBEL ALI FREE ZONE- DUBAI DUBAI AIRPORT FREE ZONE DUBAI MEDIA CITY DUBAI INTERNET CITY DUBAI GOLD & DIAMOND PARK Dubai Health Care City Dubai Multi Commodities Centre SHARJAH AIRPORT INTERN'L FREE ZONE HAMRIYA FREE ZONE -SHARJAH AJMAN FREE ZONE RAS AL KHAIMAH FREE  ZONE Location Dubai Dubai Dubai Dubai Dubai Dubai Dubai Sharjah Sharjah Ajman Ras Al Khaimah Contact 800-JAFZA +971 4 299 5555 +971 4 391 4555 +971 4 391 1111 +971 4 362 7777 +971 4 324 5555 +971 4 424 9600 +971 6 5178231 +971 6 5263333 +971 6 7011555 800 7111 Infrastructure and Service Rating (1 - 5)  4.5 4.6 4.7 4.7 4.5 4.7 4.5 4 4.3 4 4                         Nature of licences- investor can obtain 1 or more licence Trading Trading Media & Marketing Software, Internet and Multimedia Manufacturing Health care Trading  and repairing Commercial  (limited to 3 products) Commercial Trading Commercial   Service Service Event Management Telecommunications and Network Office Education Construction, Real Estate and Business Services Service  Service Service/ Professional Consultancy and Service   Industrial Industrial Service Providers (includes freelance permits) Service Providers Retail Service Providers Hotels and Restaurants Industrial  Industrial  Industrial Industrial   National industrial   Hotels & Property Management Hotels & Property Management   Hotels & Property Management Mining, Transportation, Financial intermediation and several others - - National Industrial                           General trading Allows the holder to import, distribute and store all items as per Jafza rules and regulations Allowed in accordance with the rules and regulations of Dubai Airport Free Zone As per regulations of DMC As per regulations of DIC Allowed Not Allowed Allowed Allowed Allowed  Allowed Allowed                         Types of ownership FZE (Free Zone Establishment)- single shareholder FZE - single shareholder FZC-LLC, FZE, Freelancer Branch of a foreign or UAE based company FZE Free Zone Limited Liability Company Limitied Liability Company FZE - single shareholder FZE - single shareholder fze - single shareholder fze - single shareholder   FZCO (Free Zone Company)- multiple shareholding FZCO - multiple shareholding maximum of 50. Branch of a foreign or UAE based company New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with individuals as shareholders FZCO Branch of a foreign Company Branch company of foreign as well as local FZCO - multiple shareholding. Max 5 shareholders. In certain cases may extend to 7 shareholders FZCO - 2 to 5 shareholders. fzc - multiple shareholders fzco - multiple shareholding   Branch of a foreign company  Branch of a foreign company  New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with corporate entity/entities as shareholders New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with corporate entity/entities as shareholders Branch of a foreign Company Branch of a UAE Company  Subsidary company of foreign as well as local Branch of a foreign company  Branch of a foreign company  Branch of a foreign company  Branch of foreign company   Branch of a local UAE company Branch of a local UAE company New incorporation of a Free Zone Limited Liability Company (FZ-LLC) with individuals as shareholders - Branch of a local UAE Company - - Branch of a local UAE company Branch of a local UAE company Branch of a local UAE company Branch of a local UAE company                         Minimum capital required  An FZE registration requires UAE Dirhams 1,000,000/- or USD 272109. Capital for incorporating an FZE is AED 1000 or USD 273 For LLC minimum paid up capital is AED 50000 (USD 13606) except
    Broadcasting TV segment and Broadcasting Radio Segment where minimum paid up capital is AED 2,500,000 (USD 680273) New Incorporation of a FZ - LLC requires to show a proof of minimum capital of Dhs. 50,000/- or USD 13606. New Incorporation of a FZE and FZC requires to show a proof of minimum capital of Dhs. 100,000/- FZ-LLCs incorporated in Dubai Healthcare City are required to have minimum paid up capital of AED 50,000 for Commercial and AED 300,000 for Clinical Minimum share capital of a company is AED 50000 or USD 13606 per shareholder. FZE requires  AED  150,000/-(min ) or USD 40,817 FZE requires AED 150,000 or USD 40817. FZE requires min capital of AED 185,000 or USD 50,000/-.   FZE requires  AED 100,000/- or usd 27,247   Capital for FZCO license is UAE Dirhams 500,000/- or USD 136055  FZCO  requires  AED 1000 or USD 273 per shareholder. (Maximum limit is 50. Each share should be in the denomination of AED 1000.  There are around 140 different types of licenses available and all have different minimum capital requirement.  Branch establishments have no formal capital requirements Capital requirement for each partner in case of partnership is AED 50,000/- Branch establishments have no minimum capital requirements. Different minimum issued share capital requirement can be changed for General Trading, Business Centre leases, Insurance Companies, Hotel Licenses or any other activity which authority may deem fit.  FZCO  requires AED 150,000/( min ) or USD 40,817 FZCO requires AED 150,000 or USD 40817. FZCO requires min capital of AED 500,000 or USD 136055   FZCO  requires AED 100,000/- or USD 27,247                          Offices  Annual rent cost USD 14629 for 26.88 sqm in 1 story building. The annual rent cost from USD 517 - 681 per sqm in multi storey building. Insurance for single floor building is USD 28 while for others it is 1.10 per sqm.  Minimum space of 25 sqm is necesssary to obtain a license and four employee visas are granted with every 50 sqm of rented office space.   Investors have the option to lease commercial offices, executive office, executive desk, furnished office, and retail units. Details made available upon application. Investors have the option to lease commercial offices, executive office, executive desk, furnished office, and retail units. Details made available upon application. Investors have the option to lease office units on a flexible lease option ranging between 1 and 5 years. Spaces range from 310 square feet upto 14,000 square feet. Units are provided on shell and core or fully fitted offices options. A company can sponsor one employee per 80 sq. ft. of space leased. Land sales and leasing options are available in or next to the current developed zones. Lease and sale price vary based on size of office units/land parcels and these details are made available upon application.  Commercial properties available for freehold purchase or lease. Minimum office requirement for obtaining a trade license is 540 sq ft.  1. from 21 sqm - AED 34500 or USD 9388
    2. from 24 sqm - AED 39600 or USD 10776  Size from 15 sqm to 42 sqm Annual Rent of old building is USD 6806 or AED 25000.
    Area is 16 sqm. The rent is new building is AED 1,500 per sq m Offices - USD 4087 - 8719 from 17 sqm to 45sqm Warehouses Warehouse Units available in different sizes varying between 313 Sqm to 1,110 sq m Light Industrial Units admeasuring 350 sqm and land sites admeasuring 2500 sq m available Land space available for hotels, property management and facilities management companies. Details made available upon application. Land space available for hotels, property management and facilities management companies. Details made available upon application. Investors have the option to lease manufacturing units on a flexible lease option ranging between 1 and 5 years. Spaces range from 310 square feet upto 14,000 square feet. Units are provided on shell and core or fully fitted offices options. N/A DMCC Tradeflow is a dedicated online platform for registering possession and ownership of commodities stored in UAE-based storage facilities. Please visit http://www.dmcc.ae/tradeflow to read more Land admeasuring 2500 sqm (minimum area)
    From Dh.35 per sqm, US$ 9.35/sqm (rent)
    Dh. 5 per sqm, US$ 1.36/sqm building permit. Warehouse admeasuring 125 sq m for AED 63,000/-;  250 sq m at AED 100,000/- and 400 sqm at AED 120,000/- Prebuild warehouses admeasuring 276 sq m, 416 sq m and 276 sq m available on a twenty five year lease term renewable for further term of 25 years. Lease rates can be fixed for the first five years with a rent review at the end of this period.  Warehouse rent for 100 sqm warehouse is AED 350 per sq m and 500 sqm warehouse is available at AED 300 per sq m Different sizes between 1600 sq ft and 4500 sq ft. Standard size of 2200 sq ft with storage space, office, toilet and pantry                         Other Packages - Executive Suite - AED 12,000 per month includes manager desk, 4 workstations, 1 meeting table, furnitures and cabinets, 5 car pass - - - - Virtual office (e-Package) available for AED 13,000/- per month. - Two Packages available for investors. Package 1 priced at AED 25,000/- covers office rent for 10 sq m office, 1 year license (commercial or service license) fee, service charges, P O Box, telephone line charge and allottment of 4 resident visas (visa charges not excluded). Package 2 priced at AED 35,000/- covers all of Package 1 but allows investors to carry out general trading activity.  Pakcages range from AED 21,950. Package includes one license. General Trading License priced at AED 27,150. E-commerce license priced at AED 28,050. Capital requirement for above packages is set at AED 185,000/-                           Refundable deposit Office, warehouse and showroom - 10% of annual rent payable once Security Deposit Depends on the activity.
    Entity operating in Media Business centre Executive office - USD 2722 (AED 10,000) Depends on the activity 15% of yearly unit rent is refundable security deposit.  Subject to application. Visa Deposit USD 953 or AED 3500 USD 953 (AED 3500) USD 1361 or AED 5000 Visa Deposit   - - Freelancer using "Hot Desk" facility of media business centre - USD 1361 (AED 5000) - 15% of yearly rent for fit out deposit which is also refundable.  - - - - - - Licence fees per annum  Trading license (7 Products) - USD 1497 (AED 5500) Trade  - USD 2722 (AED 10000) As per the activity As per the activity AED 5500 or USD 1497 As per the activity As per the activity General Trading  = USD 4082 or AED 15000 Commercial license (5 items)  = AED 2750 or USD 749 General trading licence - AED 9100 or USD 2477 General Trading - USD 4082 or AED 15000   Trading license (12 Products) -USD 2449 (AED 9000) Services - USD 2722 (AED 10000) Freelancer (upto 3 activity) - USD 2041 (AED 7500) Upto 5 activities within the segment -  USD 4082 (AED 15000) - - - Commercial   = USD 2041 or AED 7500 General Trading License (more than 5 items)   = AED 12000 or USD 3266   trading -
    1 activity - AED 3900 or USD 1062
    2 activity - AED 5200 or USD 1415
    3 activity - AED 6500 or USD 1769 Commercial - USD 994 or AED 3650   Industrial License between USD 1497 (7 poducts) and USD 2449 (12 products) Industrial - USD 2722 (AED 10000) - Additional segments within Business Unit - USD 2722 (AED 10000)  - - - Industrial = USD 2041 or AED 7500 Industrial license - AED 2750 or USD 749 Service License -  AED 6500 or USD 1769 Industrial - USD 1361 or AED 5000    Service License fee  is USD 2177 (Branch of UAE based company). Logistics license (Branch of UAE based company)is USD 8164 per year. - - Additional segments from other Business Unit(s) except Broadcasting, Publishing and Manufacturing - USD 2722 (AED 10000) - - - Service = USD 2041 or AED 7500  Service  license -  AED 2750 or USD 749 Industrial License - AED 9100 or USD 2477 Consultancy/ Service - USD 2041 or AED 7500   General Trading License - USD 8164 (AED 30000) - - - - - - Others types of licenses offered-

    Aviation - USD 4082 or AED 15000
    Real Estate - USD 4082 or AED 15000
    Freight Forwarding - USD 2313 or AED 8500 - National Industrial License - AED 9100 or USD 2477 - Registration of FZE USD 2722 (AED 10000)
    1. Along with MoA and AoA attestation of 3 copies each - USD 55 each copy
    2. Specimen signature - USD 14 per person
    3. Board Resolution - USD 55 per person  USD 2722 (Dhs. 10,000/-) Not Applicable Not Applicable Controlled by JAFZA Not applicable Depends on the activity USD 2,722 or AED 10000 AED 9000 or USD 2449 AED 100 or 28 USD 1905 or AED 7000 Registration of FZCO USD 4082 (AED 15000)

    1. Along with MoA and AoA attestation of 3 copies each - USD 55 each copy
    2. Specimen signature - USD 14 per person
    3. Board Resolution - USD 55 per person USD 4082 or AED 15000 AED 3500 or USD 953 AED 3500 or USD 953 Controlled by JAFZA FZLLC - AED 3500 or USD 953 Depends on the activity USD 2,722 or AED 10000 AED 9000 or USD 2449 AED 100 or 28 USD 1905 or AED 7000                                                 Distance from Dubai airport - by car 40 minutes  10 minutes 30 minutes 30 Minutes 20 minutes 10 minutes 25 Minutes 50 minutes   40 minutes  45 minutes  2 hours                          Type of port  JAFZA is a sea port  it is an air port Based in city limits Based in city limits Based in city limits Based in city limits Based in city limits it is adjacent to  sharjah airport  it is a sea port  it is a sea port near air and sea port                          Sales in UAE  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Dubai Media City offers licenses for entties engaged in services, broadcasting, hotels and leisure.  Dubai Internet City offers licenses for Software, Internet and Multimedia, Telecommunication and Network and IT services.  Dubai Gold & Diamond Park is a part of JAFZA.  Dubai Health Care City offers licenses for health care services, consultancy, regional head quarters, hotels and leisure services and property management services.  Free Zone Company can do business in UAE through an LLC incorporated in mainland with import/export license.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed.  Sales can be carried out through an agent or distributor only at 4% custom duty. Free sales in UAE not allowed. ]]>
    Wed, 17 Dec 2014 12:00:00 GMT
    <![CDATA[Private Joint Stock Companies and UAE Law]]>

    Private Joint Stock Companies and UAE Law

    When the weather changes, nobody believes the laws of physics have changed. Similarly, I don't believe that when the stock market goes into terrible gyrations its rules have changed.- Benoit Mandelbrot

    The UAE economy in the wake of the financial crisis continues to inspire positive sentiments amongst investors, entrepreneurs and the residents. It is constantly fuelled by low-interest rates and lucrative investment opportunities which when combined with the willingness of local and international companies to test the waters in the Middle East by establishing in UAE stands testament to its unprecedented growth. The winning bid for Expo 2020 is another witness to the UAE being slated as the desired international business nucleus. In recent years, UAE has observed a rapid appreciation in the real estate sector, locally owned companies being listed on the world's stock exchanges and record breaking deals in retail, investment and banking sector.

     

    In a historic move, equity index compiler Morgan Stanley Capital International upgraded UAE to an emerging market. This move is expected to attract a large institutional portfolio investment in the UAE. A successful privately owned business deems floating shares on the stock market as the most natural way of progression. A number of concerns that surround the process of being listed include but are not limited to the expansive process relating to the Initial Public Offering (IPO) which is followed by a thorough scrutiny of the disclosures and an extensive list of requirements by regulating authorities for each of the exchanges. In the UAE, the current Commercial Companies Law (being Federal Law Number 8 of 1984) the CCL lays down certain precise requirements that have previously deterred investors and their interest in listing their company on a UAE stock exchange.

     

    The year 2013 saw UAE's federal government passing a new draft for the Commercial Companies Law with certain clemencies being awarded towards the requirements for a public joint stock company. The draft of the new law spells out welcome additions to the existing law as it introduces the provision for sale of pre-emptive rights to a third party or an existing shareholder. The new draft also provides for share capital to be in form of authorized and issued share capital. A notable feature of the new draft is the provision of an employee incentive scheme allowing the employees to subscribe to shares of the company. The draft reduced the number of founding partners to five (5) instead of the previously required ten (10). In the same draft though, the minimum capital requirement for a public joint stock company was increased to AED 30 million. That being said, the draft law has not been enacted and remains under consideration.

    In an initiative to relax the present regulations surrounding the Initial Public Offering and listing of companies on the UAE stock exchanges, the regulatory body for Dubai Financial Market and Abu Dhabi, the Securities and Commodities Authority (SCA) has introduced SCA Board of Directors Decree No. 10 of 2014 Concerning the Regulation of Listing and Trading of Shares of Private Joint Stock Companies (the Decision). The Decision is aimed at encouraging Private Shareholding Companies to be list their shares and increase capital injection and shareholder liquidity.

    Pursuant to the Decision, Private Joint Stock Companies can now be listed on a UAE stock exchange subject to fulfillment of the requirements specified under the Decision. A private shareholding company (as defined under the CCL), can now list its shares on the stock market once the board of directors approve the same and the following requirements are met:

    i)                 the share capital of the company is fully paid up;

         ii)                 the company submits audited budget for the last two financial years as per the prescribed international standards;

    iii)               there are at least 30 shareholders at the time of listing; and

    iv)               the shareholder equity is not less than the capital equity.

     

    A Private Joint Stock Company fulfilling the above requirements needs to pay consideration to the legal requirements involved in the listing process. The Decision provides greater flexibility by doing away completely with the IPO process for a Private Joint Stock Company and therefore allowing the shareholders to sell their shares soon after the listing process. However, the legal requirements for listing process need to be met and have not been done away with. These include approval of the SCA, company's constitutive documents to be submitted with an exhaustive detail of company's background and finally with the submission of the prospectus. The disclosure requirements have remained similar with not much altercations.

    The UAE capital markets have recovered marvelously from the dry spell it was experiencing. The onslaught of the third quarter of 2013 saw the markets gain significant momentum. If a report published by an international audit firm is to be believed, the capital raised in the country and the wider MENA region saw the highest levels in 2013 since 2008. With the SCA's Decision to open gates of capital market for private joint stock companies, activities on the UAE stock exchange will captivate interests of locally held private joint stock companies. The further onset of Expo2020 has instilled hopes in many international businesses for further relaxations from the SCA to enable them to list their shares on UAE stock markets, however this remains a point of speculation. 

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    Fri, 05 Sep 2014 01:00:00 GMT
    <![CDATA[ОАЭ: Корпоративное управление ]]> Корпоративное управление

    «Легче болезнь предупредить, чем потом ее лечить»..

      Эта старая пословица оказывается как нельзя кстати, когда речь идет о принципах корпоративного управления и их применении в странах Залива. Использование правильных принципов корпоративного управления играет даже более важную роль, чем споры о собственности, вопросы правопреемства и споры заинтересованных сторон.

    В ходе опроса, проведенном в Международном Финансовом Центре Дубая (DIFC), выяснилось, что руководители большинства ключевых компаний считают, что их внутреннее управление выстроено на хорошем уровне. Однако этот же опрос показал, что мнения сотрудников на различных позициях в этих организациях совершенно различны. И в то время, как многие компании, в особенности упомянутые выше, претендуют на часть инициативы Правительства ОАЭ по рационализации и укреплению внутреннего кодекса корпоративного управления, то предприятиям малого и среднего бизнеса (SMEs), а также семейным предприятиям (FOEs), предстоит еще научиться применять данные практики.

    Корпоративное управление определяется как «совокупность правил, норм и процедур, направленных на достижение корпоративной дисциплины в управлении компании в соответствии с международными стандартами и методами через определение ответственности и обязанностей членов совета директоров и исполнительного руководства компании, принимая во внимание защиту прав акционеров и заинтересованных сторон» 

    ОАЭ продемонстрировали позитивный взгляд на внедрение политики корпоративного управления, так как она руководствуется строгими законодательными принципами, утвержденными в определении Управления Ценных Бумаг и Товаров ОАЭ (SCA) No. R/32 от 2007 года с поправками от Постановления Министров No 518 от 2009 года, касающихся Норм Корпоративного Управления и Стандартов Корпоративной Дисциплины, с дальнейшими поправками от Постановления Министров No 84 от 2010 года (Кодекс) и Федеральной Резолюции No 17 от 2010 года о создании Центра Корпоративного Управления в Абу Даби.

    В этой статье мы рассмотрим существующие практики корпоративного управления и необходимость их применения всеми компаниями.

    КОРПОРАТИВНОЕ УПРАВЛЕНИЕ НА ГОСУДАРСТВЕННОМ УРОВНЕ

    Компании, зарегистрированные в системе NASDAQ Международного Финансового Центра Дубая, Финансовой бирже Абу-Даби (ADX) и на Финансовом рынке Дубая (DFM), должны в обязательном порядке придерживаться правил, установленных регулирующими органами этих организаций. В то время как NASDAQ регулируется Управлением по регулированию финансовых услуг Дубая (DFSA) и подчиняется правилам Международного Финансового Центра DIFC, который будет рассмотрен в последующих выпусках, ADX и DFM регулируются SCA в рамках установленного Кодекса.

    Представители отрасли, управляемой Кодексом корпоративного управления SCA, включают в себя нефинансовые учреждения и открытые акционерные общества, которые должны соответствовать следующим стандартам::

    a. Разделение полномочий и определение обязательств – Кодекс предусматривает четкое указание на разделение власти, дифференциации между вопросами управления и собственности. Он устанавливает, что любая компания, зарегистрированная на рынке, должна управляться советом, который должен быть избран акционерами. По крайней мере одна треть членов совета должны быть независимыми и «неисполнительными». Позиция председателя и управляющего директора должна заниматься разными людьми. Кодекс гласит, что собрание совета директоров должно проходить дважды в месяц. Кодекс также предусматривает формирование комитетов по аудиту, вознаграждениям и назначениям, а также сотрудника по соблюдению корпоративного контроля.

    b. Внутренний контроль и информация – Положения Кодекса получили одобрение и небольшую критику за основные пункты, относящиеся к внутреннему контролю и информации для членов совета директоров. Основные пункты Кодекса о разглашении и заявления SCA несколько расходятся в суждениях. Компании обязаны внедрить и использовать строгую политику внутреннего контроля и осуществлять информационную и консультативную поддержку внутри совета директоров. В дополнение к этому члены совета должны предоставлять подробную информацию в SCA в отношении деятельности компании, рисков и их операций.

    c. Ежегодный отчет – SCA обязывает компании предоставлять ежегодный отчет помимо прочих документов, также входящий в список Статьи 8 Кодекса. Отчет должен разъяснять решения совета директоров и их соответствие (или несоответствие) установленному Кодексу. 

    КОРПОРАТИВНОЕ УПРАВЛЕНИЕ ДЛЯ ФИНАНСОВЫХ УЧРЕЖДЕНИЙ

    Финансовые организации, регулируемые Центральным Банком ОАЭ подчиняются Циркуляру Номер 23/00 Центрального Банка, который предлагает обязательные рекомендации для структур корпоративного управления. В дополнение к этому Центральный Банк выпустил руководящие принципы, которые не являются обязательными по закону. Председатели правления банков ОАЭ, директора и руководители компаний получили соответствующие официальные руководства к действию для избежания злоупотребления властью и предотвращения хищения денег..

    ДЛЯ ЧЕГО НУЖНО КОРПОРАТИВНОЕ УПРАВЛЕНИЕ В СЕМЕЙНЫХ ПРЕДПРИЯТИЯХ (FOES) И ПРЕДПРИЯТИЯХ МАЛОГО И СРЕДНЕГО БИЗНЕСА (SMES)

    В ОАЭ существует несколько местных семейных компаний, которые имеют разветвленную сеть в различных направлениях бизнеса. В рабочем документе Торгово-Промышленной Плате Дубая, опубликованном в 2005 году, семейный бизнес определяется как «бизнес, который полностью принадлежит гражданам ОАЭ». С практической точки зрения под это определение подходят все компании, в которых 51% собственности принадлежит гражданину ОАЭ. 

    К предприятиям малого и среднего бизнеса (МСП), с другой стороны, относятся компании, в которых годовой оборот составляет менее 250 миллионов дирхам и число сотрудников менее 250. 

    Обсуждая необходимость корпоративного управления, руководящие органы зачастую спорят о том, что семейный бизнес и МСП это более мелкие единицы и поэтому основательная корпоративная политика для подобных компаний не является существенной необходимостью. В то же время необходимо извлечь урок из опыта компьютерного гиганта Intel, 90% продаж которого в январе 2013 года были получены от программных продуктов, которые еще даже не были завершены в декабре 2012. Пример Intel подчеркивает один важный аспект экономики любой страны и любого бизнеса – изменения. Развитие экономики, слияние доходов, объединение корпораций – это то, что понимается под словом «изменения» в экономике. Согласно исследованию, опубликованному в DIFC, на которое опирается данная статья, бывший директор Международного Финансового Центра Дубая заявил, что «почти 95% семейного бизнеса не существует дольше третьего поколения собственников из-за недостатков последовательного планирования». На таком конкурентном и меняющемся рынке цена пренебрежения принципами корпоративного управления может оказаться больше, чем потеря нескольких заинтересованных сторон..

    МСП и семейные предприятия должны понимать сам процесс корпоративного управления и его ключевые принципы, включающие следующее::

    • Последовательное планирование;;
    • Разделение ролей владельца и управляющего;
    • Поддержание отношений с заинтересованными сторонами;
    • Избежание конфликта интересов;
    • Определение исполнительных ролей;
    • Поощрение неисполнительного участия для продвижения принципа беспристрастности;
    • Увеличение внутреннего контроля; и
    • Создание позитивной рабочей среды.

    ЗАКЛЮЧЕНИЕ

    Не взирая на статус и тип компании, политика корпоративного управления должна быть внедрена в ее рамках для обеспечения устойчивости в долгосрочной перспективе. Внешние правила сами по себе не могут помочь предприятиям развиваться и процветать без наличия внутреннего контроля и управления. В заключение, следует сказать, что основная необходимость для компаний это осознание, что руководство компанией в некоторых аспектах отличается от организации работы компании.. 

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    Fri, 21 Mar 2014 12:00:00 GMT