Lexis Middle East Law Alert - June /July 2014

June / July 2014 lexismiddleeastlaw.ae

PROFILE OILTamer Nassar of Baker Hughes

PROFILE EDUCATIONNick Guest of GEMS Education

CONTRACT WATCHAll at sea

A ROUND-UP OF LEGAL, FINANCE AND TAX DEVELOPMENTS ACROSS THE MIDDLE EAST

RISKY BUSINESSLegislative change in the GCC insurance market

Published in conjunction with the Association of Corporate Counsel

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| Lexis Middle East Law Alert | June / July 2014 | lexismiddleeastlaw.ae 1

FEATURE: RISKY BUSINESS p2Legislative changes across the GCC insurance market

FEATURE: GETTING THE HOUSE IN ORDER p10Corporate governance changes in the region

FEATURE: WORKING ON EMPLOYMENT LAW p14Employment law changes across the GCC and elsewhere

LEGAL ROUND-UP p6...including the new UAE SME Law

TAX AND FINANCE ROUND-UP p8...including the region's first ever online tax manual in Qatar

IN-HOUSE PROFILETamer Nassar >Baker Hughes p17A Legal and Compliance Director's experience of environmental legislation

Nick Guest > GEMS Education p19A Chief Financial Officer talks about education regulation

MOVERS AND SHAKERS p21Round-up of the big moves across the region

CONTRACT WATCH p24All at sea

CON

TEN

TS

Elias Hayek

Mona Ashour Madi

Anneliese Reinhold

Ziad Zarka

Khalid Khan

Tamer Nassar

Franklin Breckenridge

Cover - © Gettyimages/Cultura RM/Ian Spanier

LESSONS FROM 2008

B ack in 2008 when the global financial crisis first hit the GCC, the key focus for most companies was whether it would impact them directly and what they might have to do next. For some the immediate response was restructuring, others raised additional

finance or scaled back operations. What’s interesting, however, is six years on, although the regional and global economies have changed, the global economic crisis' impact continues to be felt. Companies may now be talking about exploiting opportunities brought by events like the World Cup in Qatar or World Expo 2020 in Dubai or if now is the time to expand their operations with developments in Iraq, Libya or Egypt but this isn’t all. They are also still thinking about the lessons from 2008. It’s being talked about in many quarters and the 7th Annual Corporate Counsel Forum Middle East took it as its theme. In part this is because of new legislation and regulations coming in. In this issue we also look at two areas - Corporate Governance and employment legislation where GCC legislators have specifically gone out to ensure the regulatory framework can respond in the future to the scenarios which became more common in 2008. As a result, corporate counsels have to keep up with a whole host of regulatory refinements. Companies have also become leaner and meaner as a result of what happened and many are still thinking about that. So it's not a surprise one of our interviewees in this issue, Nick Guest is talking about the importance of company liquidity. It's likely we can expect more small changes or refinements to legislation as a result of what happened in 2008 from GCC regulators, and the online news service Lexis Middle Law provides to Corporate Counsel Middle East members, can help keep track of these. The networking and training opportunities provided by the Corporate Counsel Middle East group can also help firms ensure even in times of growth, when it can be tempting to rest on your laurels, your company has the information to enable them to exploit opportunities and maintain efficiency.

Elias Hayek - Chairman & President of the Corporate Counsel Middle East Group

© Gettyimages/XXXX

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lexismiddleeastlaw.ae | June / July 2014 | Lexis Middle East Law Alert |2

RISKY BUSINESS

LAW FOCUS

As population and legislative change drives GCC insurance market growth, Michael Kortbawi and Amira Janine El Masry of Bin Shabib & Associates look at the current regulatory position.

WHAT’S HAPPENING AND WHY?

“A ccording to a report by A.M Best on insurance market growth in emerging markets, this market experienced 21% growth in the GCC between 2002

and 2012. This has been mainly driven by the UAE and Saudi Arabia, where growth of 26% is expected up until 2017,” Michael Kortbawi explains.

“Unlike more developed countries, where insurance is a saturated market focusing more on niche products, firms in the GCC have a broad line of segments they can operate in. Although a report by Alpen Capital showed life insurance made up about

14% of the GCC insurance market in 2012 and non-life insurance business accounted for 86%."

“There’s also an emerging and rapidly growing Takaful or Islamic Insurance market in the region, where products have become popular because they provide religious based protection. In Saudi Arabia, $4.3 billion has been generated from Takaful products or over half of the total GCC estimate for 2010. We have also seen Al Madina insurance company in Oman convert from a conventional insurer into a Takaful one. New regulatory frameworks are being put in place to regulate these Islamic insurance activities.”

LAW FOCUS


Business and Trade Ministry and the QFCRA uniting. As insurance providers in the QFC are allowed to sell insurance products to all except state entities, this unification may open the market to local insurance providers. The fact the insurance sector has not been actively regulated or supervised can partly be attributed to the establishment of the QFC in 2005, which has become the country’s hub for insurance retail and wholesale businesses,” Amira Janine El Masry says.

“However, we may see this start to change with Qatar’s introduction of its Social Insurance Law (Qatar Law No. 7/2013) which has created a national health insurance scheme for nationals, residents and visitors. Saudi, Abu Dhabi and Dubai enacted compulsory health insurance in 2006 and 2014 respectively, and Qatar arguably issued this law in response to these other countries setting the standard. It was enacted very recently and for now mainly Qatari women are covered, but all other nationals are expected to follow and the law will be fully implemented by 2015. The state will then provide health cover for all Qatari nationals and employers will cover employees and their families. Insurance providers will only be able to provide 'Additional Health Services' and the National Health Insurance Company (NHIC) a fully owned government entity will provide all 'Basic Health Services'. The NHIC will be responsible for Qatari nationals’ health insurance, employers will be liable for that of expatriates and their dependants and visitors will need their own travel health insurance,” El Masry adds.

“The QFC and the DIFC have similar regulations. However, the DIFC’s main insurance business is reinsurance, rather than retail and wholesale activities permitted by the QFC. In the QFC, companies must set out written details in the policy of how a policyholders’ deficit is to be treated and the QFCRA Rulebook prohibits loans from one fund to another, preventing the use of surpluses from one fund to cover the deficit of another. This gives policyholders transparency in how the fund and all monies are to be handled in line with Islamic principles.”

SAUDI ARABIA“The Saudi Arabian Monetary Agency (SAMA) applies the Kingdom’s laws and regulations on conventional and Takaful insurance equally. As their insurance laws have to be Sharia compliant, many Takaful elements are found in conventional insurance. So by law policyholders receive

RELATED LEGISLATIONOman Decision No. 53/2013Insurance brokers licensed on the date of enforcement of this regulation will arrange their situation in line with its provisions, within no more than six months from its enforcement date. However, this may be renewed by the Chief Executive of the Capital Market Authority.

(Source: Lexis Middle East Law)

“This rapid growth can be traced back to compulsory insurance coverage enactments for residents, like medical insurance in Abu Dhabi (2006), Dubai (2014) and Saudi Arabia (2004), and motor insurance which is compulsory in all GCC countries. Regional population growth is also having an impact, as are increasing numbers of people under 30, increases in GDP and more consumerism which also results in higher demand for insurance related to liabilities created by more purchasing of products like houses and cars. In fact, the 2010 GCC Insurance Barometer statistics showed property, miscellaneous insurance and motor insurance were the fastest growing segments.”

“Another impacting factor has been the financial crisis. After construction projects were abandoned investors started to become more aware of the risks associated with real estate developments and large scale infrastructure projects. As a result, this non-life segment is expected to grow further, while the life insurance sector, is largely dependent on expatriates, since the local population has religious inhibitions towards it. Non-compulsory insurance products have also become more sought after because of political instability in the region which has increased risk awareness of property and personnel losses businesses may incur. However, there is a risk growth in this industry might be limited by regulatory gaps, insurance professionals’ lack of technical knowledge, insufficient corporate governance provisions, a local aversion to risk-taking and an inability to underwrite large risk which will continue to be transferred to foreign reinsurers. Local insurers also tend to lack the financial resources to underwrite large amounts and know-how which foreign insurers may bring as a result of long experience in a range of segments. One other area which is being discussed in the motor insurance sector, is insurance unification or the wish to create a unified system. Currently, a unified system, the ‘orange card’, includes other countries in the MENA region, such as Jordan and Egypt and provides cross-border third party liability motor insurance. The intention is to also have a system only for the GCC, which is to be more extensive than what is currently offered by the 'orange card',” Kortbawi explains.

QATAR“Qatar has a very outdated insurance law (Qatar Decree-Law No. 1/1966). Although progress was made when the Central Bank enacted Qatar Law No. 13/2012, which regulates financial institutions, including insurance and reinsurance companies, as well as Takaful and Islamic finance providers. This law extended its reach to financial institutions in the Qatar Financial Centre (QFC), although it is a financial free zone. In Qatar, the two regulators (the state and the Qatar Financial Centre Regulatory Authority (QFCRA)) are integrated under one regulation. However, there are rumours Qatar may unite these two regulators with the

Michael KortbawiPartner

Bin Shabib & Associates

Amira Janine El Masry

AssociateBin Shabib & Associates

LAW FOCUS


10% of the profit surplus, or a reduced premium the following year and 90% of the profit surplus goes to shareholders. Most insurance companies also offer Takaful insurance products (e.g. Family Takaful), but although the law doesn't provide for separation of Takaful funds and shareholder funds, qard Hassan (interest free loans which cover policyholders’ accounts’ deficits by shareholder funds), or for the appointment of a Sharia Board to oversee the compliance with Sharia law, most insurance companies apply these principles on their policies. The 2012 mortgage law is also likely to increase the availability of property and expand the demand for property insurance, impacting this non-life sector in the Kingdom,” Kortbawi says.

THE UAE“In the UAE and Dubai International Financial Centre (DIFC), there are specific Takaful and Retakaful insurance regulations (the Takaful Regulations issued by Insurance Authority Board Resolution No. 4/2010 and Islamic Finance Rules (IFR) Instrument No. 125/2013 issued by the Dubai Financial Services Authority (DFSA)). Takaful insurance providers in the UAE must comply with Federal Law No. 6/2007 and Takaful Regulations simultaneously. However, the 2007 law doesn't address all insurance issues and so the Insurance Authority has been issuing resolutions, e.g. Cabinet Resolution No. 42/2009 and Federal Resolution No. 8/2011 to bridge these gaps. The Insurance Authority has also recently issued Administrative Decision No. 15/2013 to better cover the relationship between insurance companies and brokers and between brokers and their clients. It mainly covers insurance brokers' minimum capital and guarantee requirements. Brokers licensed in the UAE must now have a minimum paid up capital of three million AED and brokers operating as a foreign branch must sustain a minimum capital of 10 million AED. A minimum bank guarantee of three million AED for locally licensed brokers and five million AED for foreign branches has been implemented. An other regulation Administrative Decision No. 58/2013 has also been issued to cover qualifications for entry into the brokerage market. Brokers need a high solvency level (even higher for foreign companies or companies incorporated in the free zones). There are also additional professional education and practical experience standards needed for brokers under the Additional Regulations. These capital minimums and education standards for those

in high positions in brokerage companies will aid consumer protection but may lead to smaller brokers either disappearing from the market or having to merge. The insolvency issue has also been addressed. Insurance beneficiaries under a policy have priority over other creditors. However, similar regulations have not been introduced or implemented in the QFC or Saudi Arabia. There has also be talk in the UAE of new bank assurance regulations to further liberalise the market and encourage the selling of insurance products in the country’s banks. The Central Bank has drafted a resolution, to regulate banks and insurers wishing to participate in these activities with their approval, but they may only be allowed to market these products."

OTHER GCC STATES“Kuwait’s insurance sector has an underdeveloped regulatory system. Under its insurance law (Kuwait Law No. 24/1961), companies are regulated by the Commerce and Industry Ministry. New laws are being proposed, but major reform of the current system is not currently envisaged. Meanwhile in Oman, the Capital Market Authority acts in line with Oman Sultani Decree No. 12/1979. This is a very outdated law. However, the regulators intend to introduce developments to the conventional and Takaful insurance regime in the future. New laws are in the process of being drafted, but there is currently no detail on when these will be implemented. Previously the Takaful regime was non-existent in Oman, but since 2012, when the Sultanate introduced a vast framework for Islamic banking, it has been allowed. This was what led Al Madina to convert from a conventional insurer into a Takaful insurance provider. The insurance law addresses how policyholders and beneficiaries are prioritised, in line with similar DIFC and UAE provisions. There may also be more involvement in the sector from the Capital Market Authority and further regulatory changes, particularly to minimum paid-in capital requirements of composite insurance providers. Like Oman, new regulations are also being looked at in Bahrain, where the Central Bank is planning on issuing a new regulatory Takaful insurance framework. These proposals are intended to restructure the calculation of capital, which should replace the existing regime (qard hassan). Previously, shareholders could administer money from their share capital to balance out any deficit in the policyholder’s fund, as is the usual GCC practice. The new law intends to require approval of the firm’s Sharia Board and Board of Directors to calculate any fund excess or deficit and replace it with capital injections. The Bank’s approval will also be required to distribute any capital to policyholder’s funds. Financial reporting will also be increased to an annual basis, instead of the current three year reporting system and performance fees will be abolished. The introduction of a special purpose sukuk vehicle had also been discussed between the Bank and the industry for the past two years and may happen by the end of the year,” Michael Kortbawi concludes.

RELATED STORYUAE: Arabic Documentation Deadline ExpiresLNB News 03/04/2014 70The 30-day deadline given by the UAE's Insurance Authority for companies in the country to provide their documentation in Arabic has expired. The Arabic versions will be used in disputes.

LEGAL ROUND-UP


hearing preparation time from 30 to nine days. The previous system allowed one month for the first hearing, followed by another month to verify the defendants' contact details, then a third month followed before a court hearing was actually held. Under the new system, which will be trialled for three months defendants are notified of cases filed against them by email, text message and phone calls.

QATAR

LABOUR LAW UNDER REVIEW

The Qatari government is reviewing Article 66 of the 2004

Labour Law. The aim is to amend the legislation so employees’ salaries are paid into their bank accounts by companies and businesses. The review was prompted by Labour Ministry inspections which discovered salaries of expatriates working in the construction sector are not being paid regularly. Qatar’s Central Bank has also asked all banks operating in the country to amend their regulations to allow bank accounts for expatriate workers to be opened.

SAUDI ARABIA

HACKERS PUNISHABLE The Telecommunications and Information Technology Authority

has confirmed internet hackers can be punished under the Kingdom’s laws. It was stated hackers who target websites by spying on their communications and attempt to use this information to blackmail individuals or misuse their bank details, will be jailed for between one and ten years and fined between 500,000 and 5 million Riyals. The Authority's spokesman Sultan Bin Mohamed Almalik added the Kingdom has a strict policy towards this type of crime and a Decree has been issued in the past to regulate the information technology sector. The aim is to preserve public rights and interests. Almalik also called for social awareness of e-crimes to be increased and stressed the importance of informing the authorities if these crimes take place.

PRIVATE SECTOR SALARIES The Saudi General Organisation for Social Insurance has requested

all private businesses and companies reveal the salaries, commissions and housing payments paid to their Saudi and non-Saudi staff. The aim is to ensure both transparency and adequate salary levels for staff. Private businesses operating in Saudi Arabia have two months to provide the organisation with details of the financial rewards paid to their staff. Those who do not could loose their business social insurance certificates and access to all services offered by the Ministry.

In addition, a Ministry Decision has also been issued in the Kingdom which

LEGAL ROUND-UPCOVERING RECENT KEY LEGAL DEVELOPMENTS – REGION-WIDE

Dubai Official Gazette No 375-377 – These Gazettes include Dubai Executive Council Decision No. 2/2014 adopting a Tourist Dirham for the Emirate.

UAE Official Gazette No 560, 561 – These Gazettes include Federal Law No. 2/2014 on small and medium enterprises.

Kuwait Official Gazette No 1167-1180 – These Gazettes include Kuwait Law No. 3/2014 amend-ing certain provisions of Kuwait Law No. 32/1968 concerning currency, the Central Bank, and the organisation of banking business.

Oman Official Gazette No 1041-1054 – These Gazettes include Oman Decision No. 22/2014 promulgating the National Numbering Plan regulation.

Saudi Arabia Official Gazette No 4500-4512 – These Gazettes include Saudi Arabia Royal Decree No. M11/1435 approving the penal law for the crimes of fraud.

(Source: Lexis Middle East Law Official Gazette Index)

GAZETTE WATCH

UAE

CHANGES FOR SMESA new law, Federal Law No. 2/2014 regulating relations between

government departments and small and medium companies operating in the country has been issued. As a result a council for small and medium companies, operating under the Economy Ministry will be formed. The law provides a definition for small and medium companies, using three indicators - numbers of employees, annual turnover and capital.

In addition, the Executive Chairman of the Khalifa Fund for Project Development, Abdullah Aldarmaki, has announced small companies will be given priority for government tenders worth less than 1 Million AED. Small and medium sized companies will also get support marketing their products from the government.

DUBAI

HOLDING PATIENTS ILLEGAL

The Chairman of Dubai’s Judicial College Dr Jamal Alsmaiti has

confirmed it is a criminal offence under federal law for hospitals and medical centres to hold patients against their will to ensure treatment costs are settled. The confirmation follows an incident which involved a private hospital who refused to release a premature baby to his parents because of outstanding costs which their health insurance company refused to pay.

Alsmaiti said hospitals have no right to prevent patients from leaving until the cost is settled. He also said this is a form of patient abuse and is considered kidnapping. Alsmaiti called on patients and their families to seek police help immediately if they are subjected to this type of treatment and said cost related disputes should be settled by courts.

QUICKER HEARING PREPARATION

The Dubai First Instance Commercial Court has launched a

new electronic system which will reduce

LEGAL ROUND-UP


would see expatriates who violate their visa working conditions by leaving their employers and working self-employed being required to pay 10,000 Riyals and asked to leave the country.

Fines would be increased to 25,000 Riyals, one month imprisonment and deportation for a second offence and fines of 50,000 Riyals, six months imprisonment and deportation for subsequent offences.

AGRICULTURE GRANTS LINKS TO WATER USAGE

The Agriculture Development Fund has announced loans and

grants to farmers will be linked to their water usage.

The Fund’s General Director has said a set amount of water will be allocated to each farmer. Farmers will also be required to adhere to the Fund's procedures and those who reduce their water usage will be offered government incentives. The aim is to move away from traditional watering methods, like dropping or flooding, in favour of new technologies.

OMAN

WORK PERMIT RULESA Decision suspending the issuing of work permits for labourers and

cleaners for six months has been issued by Oman’s Work Forces Minister, Abdullah Bin Nasir Albakri. The Decision became effective on 4 May 2014.

The Decision says international companies, consultancies, public project firms and firms owned by nationals who have been registered with the General Authority for Small and Medium Projects Development and insured with the General Authority for Social Securities may be exempted from the Decision.

BAHRAIN

CRIMINAL RESPONSIBILITY The Shoura Council has approved an amendment to the Kingdom’s

age of criminal responsibility law, which if approved by the King, would see those aged between seven and 15 classed as juveniles. Despite concerns from the Interior Ministry the law has now been

referred to the King for further consideration.

CO-OPERATION CLARIFIED The Interior Ministry has announced recent security

cooperation activities between Bahrain and Jordan fall within the remit of the cooperation agreement signed between the two countries.

The agreement encourages joint training programmes and other cooperation to tackle terrorism and organised crime.

KUWAIT

LICENCE DECISION REVOKED

The Trade and Industry Ministry has retracted an earlier Decision

to suspend the renewal of trade and industrial licences which had expired over a year ago.

Companies have now until September 2015 to renew these licences. Licensees wishing to make such renewals must provide a number of documents, including their original trade licence, the company’s budget and in the case of limited companies' minutes of their meetings.

In addition, a new capital certificate demonstrating the company's current capital and the capital of all of its branches is also needed.

IRAQ

UNIFIED QUALITY STANDARDS FOR CONSTRUCTION PROJECTS

The Construction and Housing Ministry is to set unified quality

standards which will need to be implemented in construction projects in Iraq. The standards are to be issued in 37 booklets and will cover all aspects of construction projects, including planning, design and execution. Foreign and local construction companies will be asked to adopt these new standards, as well as five other standards which will cover civil, electrical, mechanical, health and bridge and road projects.

Abu Dhabi: The decision to cancel the upper 5% rent cap has led to an increase of between 33 and 128% in rents...

Sharjah: The Sharjah Ruler, Sheikh Sultan Bin Mohamed Alqasimi has issued directives aligning the salaries of children of female nationals with those of male nationals...

Sharjah: Directives have been issued establishing a new family court in Sharjah which will deal with family disputes and offer support to families...

Saudi Arabia: The Labour Minister and President of the Supreme Judicial Council has issued a circular to all courts and notaries requesting they accept national ID cards as sufficient proof of identity without requiring human identifiers to be present...

Saudi Arabia: The Saudi Cabinet has reached an agreement to establish a Commercial Arbitration Centre to hear commercial and civil disputes there...

Saudi Arabia: It has been announced Bedouins will not be able to benefit from the new e-housing system because they cannot pay electricity bills...

Kuwait: The GCC Commercial Arbitration Centre has signed a co-operation agree-ment with Kuwait’s Fatwa and Legislation Department to improve institutional arbi-tration across the GCC. Both parties will exchange information and case studies, delegate representatives and organise conferences and forums on arbitration...

Bahrain: The Shoura Council has agreed to add ‘financial abuse’ to the draft family protection law...

GCC: The Heads of Supreme and Cassation Courts in the GCC countries are examining the possibility of creating an electronic link between the courts to improve cooperation between the jurisdictions...

Qatar: The Supreme Council for Family Affairs has been scrapped by the Labour and Social Affairs Ministry...

Qatar: A ban on the use of gas cookers in malls and shopping centres has taken effect...

Iran: An environmental agreement has been signed with Japan and will lead to co-operation on climate change, lake protection and water resources...

Jordan: The National Construction Council has approved new green building standards with Amman’s General Secretariat...

REGULATORY ROUND-UP

TAX AND FINANCE ROUND-UP


TAX AND FINANCE ROUND-UPCOVERING RECENT KEY TAX AND FINANCE DEVELOPMENTS – REGION-WIDE

the first organisation in the region to publish its entire in-house tax guidance manual online.

The QFC Tax Manual is intended to help corporate taxpayers and their agents interpret the rules and regulations, provide them with greater certainty and clarity and assist them in preparing tax computations and returns.

KUWAIT

ISLAMIC AUDITING RULESAccording to a statement from Kuwait’s Islamic Auditing Office,

Islamic auditing rules do not contradict ordinary auditing rules.

The statement clarifies the meaning of ‘auditing’ in the Kuwaiti Capital Market Authority’s Kuwait Decision No. 7/2010 which distinguishes between ordinary auditing and Islamic auditing. Islamic auditing is mostly concerned with adherence to Islamic teachings and Sharia Law rather than the International Accounting standards.

FATCA MOVEThe Ministry of Finance has announced it is close to signing

the Model 1 Intergovernmental Agreement of the US Foreign Account Tax Compliance Act (FATCA). A committee created by the Ministry is coordinating with stakeholders in order to identify all financial institutions under the scope of FATCA and invited them to register with the Internal Revenue Service (IRS) by 5 May 2014. All Gulf Cooperation Council countries are in discussions about finalising the FATCA agreement before 1 July 2014, in order to prevent fines being imposed on their financial institutions.

BOURSE COMPLAINT FEESThe Kuwaiti Bourse Board has presented a proposal to the

Capital Market Authority suggesting an increase in fees for complaints involving the law on revealing the interests of companies listed on the Bourse when dealing in particular shares.

UAE

ISLAMIC AUDITING STANDARDS

Banks operating in the UAE are currently discussing the first set of

Islamic internal auditing standards, in order to prepare Dubai’s financial sector for Islamic banking regulations. The new standards would follow the international auditing standards, as well as adhering to Islamic Sharia Law. At an international level there have also been moves to revise the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)’s Certified Islamic Professional Accountant qualification. This will be the first time the qualification curriculum has been reviewed since its launch in 2006. The aim will be to reflect contemporary issues, particularly those which emerged as a result of the financial crisis and ensure understanding of the underlying Sharia principles and standards, and exposure of practical issues facing Islamic financial institutions. In addition, there have also been developments in the Emirate in the area of more conventional auditing after it was announced the Economy Ministry has reviewed the draft Auditors' Law and will present the final draft to the Cabinet for further consideration.

TAX PLANSUAE’s Finance Minister and Dubai Deputy Ruler, Sheikh Hamdan Bin

Rashid Al Maktoum, has denied there are plans to impose an income tax on individuals.

However, feasibility studies to implement an income tax on companies are underway. In addition, the implementation of taxes on tobacco and some other harmful products are also being considered, alongside a new tax on foreign remittances.

DUBAI

CUSTOMS FEESThe Dubai government is to exempt exhibition goods

entering the Emirate from customs fees.

Companies participating in exhibitions in Dubai can now keep their goods in the Emirate for up to one year without paying these fees. However, a declaration from the source country is required, in line with the Istanbul Convention on Temporary Admission. Goods for technical exhibitions, exhibitions on the fringes of conferences and those organised by trade centres of countries active in international trade in Dubai are all covered by the exemption.

FIRST ISLAMIC TRUST FUND

Emirates REIT-CIAC Limited has become the first Islamic Trust

Fund for real property investment in the Dubai International Financial Centre (DIFC) to list official shares on the NASDAQ Dubai exchange. Investors will be able to deal in more than 46% of the shares following the successful initial listing stage.

OMAN

EU CHANGEA member of Oman’s Chamber of Commerce and Industry, Ali bin

Salim al Hajri, has criticised a decision by the European Union which prevents Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE from accessing the EU’s preferential trade scheme from 1 January 2014. The decision means Omani and other GCC exporters and investors will need to be aware of the EU’s standard export and investment requirements. It also means normal customs duties will apply. The GCC states are among a number who have been impacted by this change, including Libya. Preferences under the scheme will also be deferred for Iran and Azerbaijan. The GCC is currently the EU’s fifth largest export market.

QATAR

FIRST ONLINE TAX MANUALThe Qatar Financial Centre Authority (QFCA) has become

TAX AND FINANCE ROUND-UP


Under the proposal, non-refundable fees for each company would rise from 500 to 1000 Dinars. The proposal also includes a suggestion that the cost of reviewing the Revealed Interest records should be increased from five to 20 Dinars each time the record is reviewed.

SHARE LISTING CONTRACT Kuwait’s Capital Market Authority has asked broker businesses

operating on the country’s Bourse to use a new unified share listing contract.

The new contract consists of a comprehensive contract and an annex including the e-exchange. It requires all shareholders to have enough liquidity in their bank accounts to buy the shares.

In addition, it grants brokers the power to refrain from buying or selling shares if their customers do not have the financial means to cover these dealings. Brokers are also not allowed to accept instructions from their clients via mobile phones. The new contract came into effect on 31 March 2014.

EGYPT

ANTI-MONEY LAUNDERING LAW AMENDMENT

Egypt is to amend its 2002 Anti-Money Laundering Law

to add terrorism funding to the list of crimes classed as punishable. These new amendments also include some additional finance firms and individuals to the group of monitored entities.

Under the legislation, the unit responsible for anti-money laundering will be renamed the Anti-money Laundering and Counter Terrorism Unit. Its staff will have judicial and monitoring powers. International agreements signed by Egypt are not affected by these amendments.

OUTSTANDING TAX MOVESThe General Secretary of the Tax Department has

announced they have started implementing measures to retrieve outstanding tax. These will include confiscating and selling possessions of taxpayers with outstanding tax payments at public auctions.

BOURSE CHANGE CALLSThe Director of the Egyptian Bourse, Mohamed Omran, has

called on the government to introduce legislative reforms to boost the Exchange and make it easier for government disputes with international investors to be settled.

He added he expects the precautionary measures introduced to the Bourse in 2011 will remain in place and that pricing limits on small and medium shares will not be cancelled.

VAT UPDATEThe Egyptian Tax Authority Chairman has announced

the standard rate of VAT will be set at between 10-12%.

A higher rate will apply on some luxury items and other goods, including alcoholic beverages, cigarettes and cars. The Egyptian Finance Minister, Ahmed Galal has stated the government plans to repeal the country’s general sales tax and replace it with VAT from July 2014.

LEBANON

SAUDI INVESTMENTS SUSPENDED

Saudi investments in Lebanon have been suspended due to

continuing instability but they have not been cancelled, according to Lebanon’s General Consul in Saudi Arabia, Ziad Attallah.

The current security situation in Lebanon has led many investors to suspend their activities, but Attallah said Saudi investment in Lebanon’s real estate market continues to grow.

LIBYA

INVESTMENT AUTHORITY SUES SOCIETE GENERALE

The Libyan Investment Authority has filed a case against French-

owned Societe Generale Bank in London. The authority wants US $1.5 billion in compensation for alleged bribes paid to Colonel Qaddafi’s son, Saif Alislam. However, Societe Generale has said the claims are baseless.

JORDAN

TAX DEADLINEA deadline of 30 April 2014 was set for individuals to pay

their taxes and file their tax returns. The Tax Department also issued a statement calling on customers to update their personal details including their mobile numbers and e-mail addresses so they can communicate with them electronically. The penalty for not declaring income ranges from 50 to 500 Dinars and the penalty for submitting tax returns late is 4000 Dinars for each whole week or part of it.

GULF COOPERATION COUNCIL

BETTER BANKING PROCEDURES

Governors of the Gulf Cooperation Council

Central Banks have reviewed a Supervision and Control Commission report regarding risk and governance as part of attempts to introduce examining better banking procedures to strengthen the banking and finance sectors.

UAE: The UAE and Kuwait have both terminated their tax agreements with Mongolia, with effect from 1 January 2015. Under the Mongolian-UAE tax agreement, the country of source was not al-lowed to impose dividends and interest. Under the agreement with Kuwait the country of source was allowed to impose dividends and interest which did not exceed 5% of the gross amount.

Bahrain: An income tax treaty with Barbados covering permanent establishment, dividends, royalties and directors’ fees took effect on 1 January 2014.

Saudi Arabia: A tax treaty with Tunisia covering permanent establishment, dividends, income from debt-claims, royalties and directors’ fees took effect 1 January 2014.

Kuwait: An income tax treaty with Slovenia covering interest, dividends and royalties is effective from 1 July 2014.

TAX TREATY UPDATE

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GETTING THE HOUSE IN ORDER

REGIONAL FRAMEWORK

“The international concept of corporate governance came to the fore after the Enron and WorldCom financial scandals

and brought with it new and enhanced standards for all US public company boards, management and public accounting firms via the 2002 Sarbanes-Oxley Act. Other jurisdictions, including the UK, have also introduced regulation in this area, e.g. the UK's 2010 Corporate Governance Code. The GCC countries have then followed suit and they all have an established corporate governance code. These Codes were introduced in the various countries from 2002 to 2013 and generally cover similar things. One of the key features is the management of public company boards and all related matters, such

as the remuneration of directors and fiduciary duties,” Rami Wadie explains.

“International events and issues drove the initial development of a corporate governance regulatory framework in the GCC as a whole although the focus is now very much on continuing development to ensure economies in the region continue to attract international interest and investment. Across the GCC there are differences, for example there is currently divergence with global standard laws and practices in areas like the independence of board members, and shareholder participation in general assembly meetings. In some cases, this is as a result of cultural and awareness issues within the region, and this is an issue which needs to be dealt with by various stakeholders, including regulators. In the GCC these Codes tend to

All GCC states have an existing corporate governance framework, but there have been a host of recent refinements. Rami Wadie, Enterprise Risk Services Partner and Corporate Governance Leader at Deloitte Middle East examines the changes.

REGULATORY FOCUS


provide minimum guidelines for companies but they are free to adopt higher standards if they wish. Each national regulator may also issue additional directives or guidance, as and when appropriate, which tend to supplement, rather than supersede the national company laws,” Wadie adds.

“There is currently a split between those countries with a developed framework, like Bahrain, Oman,

Qatar, Saudi Arabia, and the UAE and Kuwait who have more of an evolving framework. For instance, in the UAE, listed companies need to report annually on corporate governance, and this is publicly published. On the other hand, in Kuwait, the Capital Market Authority (CMA) gives more emphasis to risk management and the boards’ oversight role. There is also a split between Oman and the UAE where specific corporate governance provisions also cover the public sector and the rest of the region’s codes which restrict their regulatory frameworks to private companies and other institutions,” Wadie adds.

IN KUWAIT“However, what is interesting is the way we are currently seeing new regional regulatory refinements. Kuwait has been the latest to make a move towards formalising its corporate governance practices. This was evident in the Corporate Governance Code for Banks published in mid-2012, which was followed in July 2013, by the CMA's corporate governance regulations. Kuwait tends to have one of the most complicated codes. The requirements are very rigorous and detailed. However, because the code did not cater for the size and maturity of listed organisations, this posed a huge compliance challenge. One of the refinements is that the CMA has requested companies operating there complete governance templates covering the financial year which ended on 31 March 2014. These templates were established to determine whether or not companies and sectors falling under its jurisdiction are implementing 300 different governance indexes. The companies have to show the number of governance indices they are currently implementing and if there are ones which are partially or completely unimplemented, they must say why.”

IN OMAN“There have also been recent corporate governance developments in Oman where the Central Bank has issued a Circular requiring banks to avoid conflicts of interest when appointing board members and senior management. In the Sultanate, both public sector and private sector bodies are also covered by the Corporate

Rami WadiePartner

Deloitte & Touche (M.E.)

RELATED LEGISLATIONMinisterial Decision No. 239/2012If a relevant party has a direct or indirect interest or benefit whether in any past or decided transaction with the company or related companies and the interest or benefit contradicts with the company's interests, they will disclose it.

(Source: Lexis Middle East Law)

Governance Code. What has been interesting is the way there have been refinements in the area of public sector whistleblowing, an important area in supporting governance codes. For example, the Sultanate’s State General Reserve Fund has announced it has launched a whistleblowing policy, making it one of the first Government institutions to do so. All employees participate in it and the aim is to encourage staff to report any illegal practices or violations of the ethical behaviour rules at work and disclose any concerns directly. A whistleblowing policy document has also been distributed to all employees to ensure they understand it, its purpose and procedures.”

IN SAUDI “Elsewhere, the Saudi Arabian Monetary Agency (SAMA) has published the first revision of the corporate governance principles for banks operating in the Kingdom, which were introduced in March 2014. This focused on disclosure of bank board members’ CVs so their competence and their ability could be examined.

Additional emphasis is also being given to board members’ qualifications, so there is confirmation that appointed individuals are fit for purpose.”

WHAT’S NEXT?“Despite the raft of corporate governance developments across the region designed initially to respond to the impact of the global financial crisis, there still needs to be work done particularly in promoting good corporate governance in the public sector in the GCC in order to promote transparency and accountability. In addition, in order to further promote the embedding of good governance in organisations' fabric, good practice needs to be publicly rewarded, and equally importantly, the poor or weak practices need to be reprimanded with clear penalties and fines. For a greater impact to be seen, it is also important as most of the wealth with these countries rests with governments, that the type of advancements seen in corporate governance in the private sector are paralleled in more states in the public sector. Oman and the UAE have made progress in this area but other countries like Kuwait and Qatar have lagged behind. A good starting point would be a greater focus on the quality of services, laying foundations via an overall strategy focussing on integrity and transparency, and clearer quality service measures and more defined performance indicators."

"Those in the public sector should also promote concepts like internal audit, risk management, control and compliance procedures (the so-called lines of defence) which are already applied in the private sector. They should also integrate relationships between internal auditors, external auditors and the State Audit Bureau or Regulators where this is appropriate,” Wadie concludes.

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WHAT'S HAPPENING?

“Collectively, the GCC hosts the world’s largest expatriate worker population, with expatriates comprising nearly 50% of the residents. In the UAE alone nearly 90% of the population is made up of expatriate workers. In recent

years, the GCC labour markets have experienced a range of disruptions including layoffs and downsizing as a result of work stoppages following the global financial crisis and the Arab Spring."

"What we have seen is, as a result, GCC law makers have responded with both long term measures aimed at protecting employees against future crises and measures to encourage the greater participation of the local population in the private sector job market,” Nazanin Aleyaseen explains.

WORKING ON EMPLOYMENT LAWThe global financial crisis encouraged regional legislators to review their employment legislation. Nazanin Aleyaseen of K&L Gates looks at the changes across the GCC, particularly in Bahrain where developments have been most dramatic.

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Do you know which ones are? We do.With Lexis Middle East Law, you are shown the current not historic legal position, along with the latest laws, cases, journals and news all at your fingertips. Plus working in partnership with the Corporate Counsel Middle East (CCME) we provide commentary from regional experts, who know and understand what’s happening on the ground.

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Updated daily. In English and Arabic.

LAW FOCUS


BAHRAIN’S RESPONSE“One of the most sweeping changes came in Bahrain, with the introduction of the 2012 Labour Law (Bahrain Law No. 36/2012 regarding employment in the private sector). This replaced Bahrain Law No. 23/1976 which had governed and controlled employer - employee relations in the Kingdom for over 36 years. The aim of this law was to bring Bahrain’s employment

relations up to international standards and provide benefits and rights to employees there, which more closely matched those offered to those in the private sector in other GCC states. Benefits available under the old 1976 Law have been increased and expanded. These include increasing annual leave to 30 calendar days, increasing sick leave to 55 days and increasing paid maternity leave to 60 days. Female workers with children under six are also allowed unpaid leave of up to six months. However, in some respects this new law is actually ahead of equivalent legislation in other GCC states. For example, unlike Federal Law No. 8/1980 in the UAE, the new Bahrain law also extends to domestic workers. Another interesting area is the way the law protects employees in Bahrain against discriminatory practices. There is a prohibition on payment of salaries based on sex, ethnic origin, language, religion or beliefs. In addition, if there are any delays in the payment of salaries to workers (whether the worker is a foreigner or a national) they will be entitled to a 6% penalty," Aleyaseen adds.

"The concept of redundancy pay has also been introduced and the scope of arbitrary dismissal has been expanded to include dismissal of an employee because they have taken their lawful vacation entitlement or have filed a labour complaint against the employer. Most importantly, foreign workers no longer require their former employer’s consent to obtain employment in Bahrain with a new employer."

"Severance pay has also been increased to half a month’s pay for each year in the first three years of service and a month for each year of subsequent service. An employee will still be entitled to severance-pay even if they were terminated for a legitimate cause. Where companies fail to comply with the new Law they can be jailed for up to three months and/or fined between 500 and 1000 Dinars. Jail sentences and fines will be doubled for repeat offences.”

UAE CHANGES“Like Bahrain, the Dubai International Financial Centre (DIFC) has also amended its employment legislation. The Free Zone’s Authority issued DIFC Law No. 3/2012

amending the existing employment law, DIFC Law No. 4/2005. This has provided employees working for DIFC companies with greater clarity on their minimum entitlements including maternity leave entitlement, which is 65 working days, anti-discriminatory provisions and statutory compensation for work place injuries. There are also entitlements to carry over accrued but untaken annual leave."

"Meanwhile, on shore, in the UAE, the big change has been the announcement in December 2013 that a compulsory health insurance provision for employees will be issued in Dubai similar to the provision in Abu Dhabi and other free zones operating in Dubai. The Qatari authorities have also announced the implementation of compulsory private health

insurance for workers in their country."

IN SAUDI, KUWAIT AND OMAN“GCC lawmakers have been taking a more active role in encouraging and promoting the participation and hiring of their own nationals in the private sector. In 2011, Saudi Arabia introduced the Nitaqat system to encourage 'Saudisation' of the private

sector. This is essentially a points based system where employers obtain points from the Labour Ministry through various hiring and HR initiatives. The higher the points, the easier it is for employers to obtain 'premium' or 'green' status which allows them to obtain new visas and recruit more staff without needing prior approvals from the relevant authorities. Changes have been made to the Kingdom’s Labour Law, in particular Article 39, to curb foreign workers being employed illegally. As a result, employers cannot now let their employees go and work for another employer. The Labour Ministry will carry out inspections and anyone found to be violating the law will be arrested, deported or have other measures taken against them by the Interior Ministry. Kuwait has also launched a crackdown to reduce its expatriate population by half by 2023 and a similar programme has been launched in Oman to promote the hiring of nationals there. The Manpower Ministry announced a freezing of employment of foreign workers between November 2013 and April 2014 in certain business sectors with the exception of foreign workers required for government projects,” Aleyaseen explains.

WHAT’S NEXT?“Amendments to policy and existing labour laws are expected to continue. In the UAE, for example, there is a proposal to review Federal Law No. 8/1980 and revise it. Similarly, in December 2013, the Saudi government approved further amendments to the Kingdom’s Labour Law, including broadening employee benefits and compensation for arbitrary dismissal. However, the extent to which these policy and law changes will impact the number of foreign workers in the GCC remains to be seen,” Aleyaseen concludes.

RELATED STORYBahrain: Draft Domestic Worker Law ApprovedLNB News 03/04/2014 83Bahrain’s National Assembly has approved a law outlining employment contracts for domestic workers and organising the relationship between employers and housemaids.

Nazanin AleyaseenOf Counsel

K&L Gates LLP

IN-HOUSE PROFILE


IN-HOUSE PROFILE LEGAL & COMPLIANCE DIRECTOR – OIL

When black gold, goes greenTamer Nassar, Legal and Compliance Director for oilfield services company, Baker Hughes' Middle East divison talks about environmental compliance in the region.

ABOUT YOU AND YOUR BUSINESSI’m an Arab-American of Egyptian-Lebanese origin and graduated with an LLB from the University of Buckingham in England and obtained a Juris Doctor from California Western School of Law in San Diego. I started my energy career with Schlumberger in 2000, in New York but had subsequent assignments in Dubai and Houston. Then in 2006, I joined a Houston-based energy projects development firm, Energy Allied International (EAI), where I honed my skills as an international corporate counsel. With EAI, I learned you have to wear both lawyer and business hats at all times in order to deliver the best results for your colleagues and the company. However, this experience changed my view of an in-house lawyer’s role forever. In 2012, I was asked by the President of Baker Hughes’ Middle Eastern Region to relocate to Dubai and participate in their ongoing transformation from the Baker Hughes group of companies to 'One Baker Hughes,' the consolidated organisation it is today. Baker Hughes Incorporated (BHI) is a global public oilfield services company, headquartered in Texas, which is listed on the NYSE. It was founded in 1907 but the modern company came into existence following a merger in 1987 between Baker International and Hughes Tool Company. In 2013 it had revenue of $22.4 billion. When I first joined Baker Hughes, I was predominantly occupied with establishing a Legal and Compliance team to support the expanding business in the Middle East. In a year, with a team of secondees and development of cutting edge web-based tools to gauge the value, origin, volume and nature of our workflow, we established an ensemble of very talented and motivated team members. Initially, I was fielding up to 2,500 emails a month and often putting in 16 to 17 hour days, five to six days a week. Things have cooled down since then. We are continuing with the restructuring and consolidation of our regional operations, geared towards minimising costs and enhancing our delivery of services to clients throughout the region. Given the size of the regional business and the various regulatory regimes involved, this is a challenge, but one which will significantly boost our performance for years to come. A typical week now generally involves travel across the Middle East to address a range of matters with internal and external

stakeholders, including dispute resolution, high-stake negotiations, M&A, litigation and agency matters.

CHALLENGES AND OPPORTUNITIESFrom an environmental perspective, the oil and gas industry has significant operational risks—hence the focus on health, safety and environment. As well as commercial and operational risks, environmental risks associated with certain activities are particularly great, as we see on the news from time to time. Generally the region’s regulatory framework is evolving - although in some cases it is quite mature. Regulatory bodies mandated with enforcement generally continue to be challenged at multiple levels (e.g. funding and resources) and on multiple fronts (i.e. political and commercial). Recent developments like Oman’s proposal to establish a body to tackle oil spills in regional waters suggest change is on the way. However, it is too early to say if this is a real, or a false dawn. A key difference between certain jurisdictions here (largely excluding the GCC countries) and elsewhere is when things do go wrong (as has been the case on numerous occasions in Egypt’s Red Sea), there is generally no environmental agency intervention—and when there is, it is with little effect. More often than not, relevant regional regulators work with involved companies in a pragmatic way to address environmental matters associated with industry operations and, if it is a matter involving a national oil company, then the National Oceanography Centre (NOC) generally will work with the private sector players to address issues in line with international standards. When it comes to commercial opportunities there are two key areas the oilfield sector is closely monitoring. Historically, companies like ours in the region have been involved in conventional exploration and production activities, but we are now increasingly looking at opportunities in the unconventional arena, including access to gas

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through operations like fracking. Activity in this field is ramping up regionally but overt regulatory challenges are not expected, as has been the case in the UK or US. This is because alleged harm caused by fracking is generally not publicised as much in the Middle East as in the West, the oil and gas exploration and production zones in the Middle East are generally also far removed from high population centres so potential impact is less.

Arguably there are also geopolitical differences here which mean most people are generally more concerned with personal, employment and food security, than environmental awareness and protection. The other key area of current focus is integrated operations (turnkey projects to develop oil and gas wells). This is a potentially hugely lucrative sector, but subject to a variety of potential operational and commercial risks.

PRACTITIONER PERSPECTIVE

Adrian Nizzola of Simmons & Simmons looks at how environmental rules and regulations are enforced across the region.

REGULATORY LANDSCAPEThere is a well-established body of environmental law in the region, so a lack of environmental legislative complexity is not the problem. The key issues are accountability,

transparency and enforcement. While each GCC country has an environmental regulator,

like the Supreme Council for the Environment in Bahrain, the Federal Environment or Justice Ministries in the UAE or the Supreme Council for the Environment in Qatar they tend to be more hands-off than their Western counterparts.

An exception to this would be if an incident like the Deepwater Horizon disaster in the Gulf of Mexico occurred here. If something like this happened I would expect someone would go to the Ruler, and a Decision would be swiftly introduced to deal with it. However, I would expect an incident as severe or lengthy as the Deepwater disaster would be unlikely to occur here as there are many national oil company stakeholders with first-rate environmental disaster response capabilities here.

PENALTIES FOR NON-COMPLIANCEPenalties tend to be preventative rather than punitive. Unlike the UK, US, Europe or Australia where companies who have committed an environmental offence could expect to have a stop order issued against them and/or be fined, in the GCC and wider region, companies are likely to have considerable pressure put on them to implement solutions to resolve the issue.

For example, if in one of the many regional Industrial cities, the regulator wanted to test nitrous oxide levels at a plant, typically, they would first give notice to the project owner, then carry out the tests together with them and then if a breach was found, ask the project owner to explain and rectify the breach before taking any further action.

KEY CHALLENGESHowever, companies can sometimes find it difficult to identify who the appropriate regulatory body is because responsibility has been devolved from the federal government to the local

municipalities or local licensing authorities.Those looking to get their first project off the ground

may encounter some difficulty identifying who they need to obtain necessary permits and approvals from.

Even where the regulator can be identified, there have been cases where companies have been using what they believe to be the best international practices and standards but have been rebuffed by the authorities who are using different standards. There can also be jurisdictional differences. Companies operating in some GCC countries may find they encounter little or no difficulty in getting their project off the ground and maintaining it, while those in other countries or emirates may encounter some issues because the regulatory framework is different.

KEY CONSIDERATIONSAny company looking to start projects in the region should come with a view that they are going to be subject to international environmental standards and best practices. They should also ensure they engage local stakeholders at the earliest opportunity and don’t just draw up a design, drop it into the appropriate body and wait for approval.

They also need to remember cultural differences in the region and be patient. It can also be useful to hire an Arabic-speaking Public Relations Officer to ensure channels of communication are kept open at all times. The regulatory timeframes companies are familiar with in other jurisdictions are not applicable here. The Western concept of deemed approvals if a regulator does not respond to an application within a certain time frame is also not typical.

WHAT’S NEXT?There are no individual regulatory developments we are aware of at present in this area.

What we are likely to see is increased cooperation at the GCC level on keeping environmental rules and regulations in line with international standards and specifically working towards unifying standards to establish a more consistent regulatory framework so, for example the regulatory process for building an oil terminal in say, Kuwait and Oman is not significantly different.

Adrian NizzolaPartner

Simmons & Simmons

IN-HOUSE PROFILE


IN-HOUSE PROFILE CHIEF FINANCIAL OFFICER – EDUCATION

As easy as ABCNick Guest, Chief Financial Officer at GEMS Education talks about the evolving regulatory framework in the GCC and wider region.

ABOUT YOUR BUSINESS AND YOUGEMS Education is an international education company which works across the private, public and philanthropic sectors. It's a family-owned business, was established in 1959 and is headquartered in Dubai, with offices in the UK, US, Singapore, India, Saudi Arabia, Qatar, Kenya and Switzerland. We've 39 schools here, including those we manage in Egypt, Saudi Arabia and Jordan and our student numbers are growing at a rate of 12-13%. We're the largest provider of facilities from kindergarten to grade 12 and employ over 11,000 education professionals, specialists and staff. Our public sector division, GEMS Education Solutions works with governments to improve school performance and the standards and expertise of government schools globally.

We have a philanthropic arm, the Varkey GEMS Foundation which aims to help 100 underprivileged children for every child enrolled in a GEMS school. I have a degree in Mechanical Engineering from Aberdeen University and am a Qualified Chartered Accountant and fellow of the Association of Corporate Treasurers. I began my accountancy career with Kingston Smith in 1988 but also worked with KPMG overseas in Bermuda for several years.

Before joining GEMS Education as Chief Financial Officer, I worked with Scottish Resources Group plc, the UK's largest surface mining company, as Chief Financial Officer. Whilst there I led the due diligence, prospectus, compliance, reporting and legal and advisory work streams to prepare the group for a main market listing on the London Stock Exchange. Before that I worked at transportation company Stagecoach Group plc, where I was Group Treasurer and Corporate Finance Director.

Having worked in Bermuda and the UK, when I came to the region, I immediately noticed the cultural differences. There are also regulatory and operational differences. Tax for instance has a much lower profile in the UAE, than in the UK although this does change as you move into Bahrain, Qatar and Saudi Arabia. It's also been interesting to see how much English law prevails here but you also have to consider Sharia law when it comes to property issues and ownership rights as well as sponsorship and dealings with nominee and partnership funding arrangements. Private

education in the Middle East is a regulated sector to ensure high standards in terms of delivery, licences, facilities, provision of education, standards and fees. Although, private education in the UAE is regulated, the regulatory framework in Qatar and Saudi Arabia takes longer to navigate and can be more complex. I also regularly look at the company’s capital structure and balance sheet to optimise our options as we grow.

There's no such thing as a typical day but I often attend meetings to examine the feasibility of a new school, a joint venture to operate a new school or the financial performance of operating units. In my two and a half years with GEMS, we have completed significant funding transactions including a 2 billion AED funding agreement for the company, which I believe was the largest private company bank deal in 2013 and consisted of conventional and Islamic finance components.

We've also completed a $200 million Sukuk and have been involved in a number of direct property transactions and sale and leasebacks of real estate, including the sale of a school building to Emirates REIT, the first UAE listed REIT. Like any expanding business, we keep our financial reporting tools under review, particularly in terms of the differing tax and payroll regimes.

REGULATORY DIFFERENCESAny child of an expatriate who works in the Middle East has to attend a private school. Private education in the Middle East is therefore a regulated private sector to ensure high standards in terms of delivery, licences, facilities, provision of education, standards and fees. Although, private education in Dubai is regulated, the regulatory framework in Qatar and Saudi Arabia is more rigid particularly in terms of getting responses from the relevant regulatory authorities.

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WHAT’S NEXT?We're focused on maintaining our educational standards and ensuring our growth continues in a controlled, managed way regionally to continue to meet the demands of increasing GDP and population. We're also watching to see how the UAE develops

as a financial centre and are looking at expansion opportunities in Africa and Asia and key international cities like New York and Singapore where quality private education is always in demand. We're also considering our ability to continue to raise capital regionally and how financial regulations will develop.

PRACTITIONER PERSPECTIVE

Amjad Hussain of K&L Gates LLP explores education regulation and project financing in the GCC.

In the last decade, GCC countries have been looking at moving from predominantly hydrocarbon based economies to knowledge based ones. The UAE and Qatar are making the most impact in this area but Saudi Arabia has also

embarked on a series of reforms of its commercial and religious education curricula to address the challenges that lie ahead in providing employment for its rapidly expanding young, school-age population. Qatar has also conducted a wholesale review of its education system together with international advisors to ensure it matches the population’s needs and its students have the skills required to support the Qatari economy. As part of this, the Supreme Education Council and Ministry of Education have been reforming various aspects of the Qatari education system. Reform is not just curriculum-based but also focuses on ensuring health and safety standards are maintained and strengthened where applicable. For example, following the Villagio Mall fire where 13 children and six adults died after a fire in 2012, Qatar Law No. 1/2014 on the regulation of private nurseries has been introduced. Kuwait has also introduced a new law, Kuwait Law No. 22/2014 regulating private nurseries. Institutions like Dubai’s Knowledge Village, the Qatar Foundation, Qatar Science and Technology Park and Education City have also been established to try to avoid the so-called expatriate 'brain drain' whereby foreign skilled workers are forced to leave the region to improve their children's education prospects.

KEY CONSIDERATIONSWho you are plays a part in how easy it is to get a school project off the ground. For example, an institution like Cambridge University would be unlikely to have any trouble establishing a research and development project in the region but a less well known establishment would probably not find it so easy. The institution’s proposed location can also have an impact.

If the school is being built outside of a free zone, the normal foreign ownership rules will apply and the institution will need to ensure it has a local sponsor. In Qatar, schools can be exempted from the foreign ownership requirements. They can be 100% foreign-owned provided they receive the approval of the Minister of Commerce and Economy. Education entities need to ensure they get the relevant regulatory

approvals (which can be cumbersome in some countries) and pre-empt any operational issues. It should be noted it is not uncommon for the state authorities to provide assistance with land, financial-return guarantees and direct support to the right institution.

Education entities must also consider if there are any local or community quotas which could affect their business plan or may impact on their charter, aims, policies and procedures. They must also be aware of their negotiating position when leasing land and property as many landlords, particularly in this region, can adopt a 'take it or leave it' approach. Leases are also normally set on a five year rolling basis which may be significantly less than home jurisdictions for many major education providers and triggers for termination of agreements are often also set much lower.

ISLAMIC FINANCE OPTIONSIslamic financing lends itself well to financing education projects, as school operators can point to the greater good which would result from the project to the local population and community. Unlike in other sectors, businesses like GEMS Education tend to be property-rich (so can provide good bankable collateral). With both a profit-making and charitable element to them, often more financing options are also available to education sector entities. There are a number of Sharia compliant instruments that lend themselves to financing companies like GEMS. For example, educational projects have tended to benefit from financial contribution through voluntary gifts (or Hiba in Islamic Finance terms). These are usually made by foundations or high net-worth individuals. Alternatively, donors may prefer to provide a benevolent, interest-free loan (or Qardr Al-hassan). This is often made by individuals for a particular project, e.g. parents of children studying at a school may provide money for maintenance or an exceptional expense. It is possible for education institutions to enter into a partnership arrangement (for example, utilising the Musharakah concept) for an investor to share in the profit and loss of the business running the school.

For greenfield operations which require buildings to be constructed, it may be more appropriate to adopt an Istisna’a (financing where by the funder procures the construction works). Also, it is possible to combine these forms of financing with a sukuk structure and offer the fundraising further afield as debt capital market instrument.

Amjad HussainPartner

K&L Gates LLP

MOVERS AND SHAKERS


QICDRC ACQUIRES NEW CEO

The Qatar International Court and Dispute Resolution Centre (QICDRC) has appointed Faisal Rashid Al Sahouti as CEO. Al Sahouti has been with the QICDRC since 2011 and

trained in both Qatar and the UK where he received a Master’s degree in law at Nottingham University.

Al Sahouti replaces Robert Musgrove, who served as CEO of QICDRC for nearly four years.

Robert Musgrove, the former CEO previously served as CEO of the Civil Justice Council of England and Wales.

MOVERS AND SHAKERSA ROUND-UP OF THE TOP APPOINTMENTS AND PROMOTIONS

BAKER & MCKENZIE BANKS ON NEW PARTNERBaker & McKenzie has hired banking and finance partner, Basel Barakat, from the Saudi Arabian firm of Hassan Mahassni. Barakat will initially divide his time between Baker & McKenzie’s associated office in Riyadh and the firm’s Bahrain office. He is a member of the New York State Bar and holds law degrees from New York University School of Law and the University of Notre Dame Law School, and an undergraduate degree from the University of Michigan.

His practice is focused on project finance, Islamic Finance and syndicated lending, as well as other transactional work. Barakat is ranked in Band 1 by Chambers Global for Saudi Arabian banking and finance work and is recognized as a 'leading lawyer' in Saudi Arabia by IFLR1000.

NEW ME MANAGING PARTNER FOR CLIFFORD CHANCERobin Abraham has been elected Clifford

Chance’s new Managing Partner for the Middle East. Abraham

specialises in project finance, restructuring, Islamic Finance and secured and unsecured

lending.He has acted on a number of

high profile banking and project finance deals in the Middle East. Abraham joined Clifford Chance in 1995, moving to the Dubai office from London in 2004. He then became a partner in 2005.

Current Regional Managing Partner, Graham Lovett, will continue as Head of Litigation and Dispute Resolution for the Middle East, following the completion of his second and final term on 30 April 2014.

In association with JLegal

CCME ACTIVITIES

RECENT EVENTSDubai

18 March 2014

Global Regulation & Investigations Forum in association with Norton Rose Fulbright.This unique and interactive seminar focused on real-life case studies. It looked at how typical issues develop.Investigations, potentially spanning anti-corruption, anti-trust/competition, financial services regulation, sanctions, tax or data privacy were also covered.

Dubai

1 April 2014

UAE Client Forum in association with Baker & McKenzie Habib Al MullaThis insightful panel discussion looked at the role of the in-house lawyer in today’s changing corporate environment. It was followed by practical workshops led by experts on compliance, arbitration and capital raising. The event provided detailed

guidance on how to navigate some of the common challenges faced by in-house teams.

Dubai

16 April 2014

Women’s Networking Event in association with Eversheds. This informal evening was held in the Garden Terrace of the Ritz-Carlton, DIFC. Guests were treated to a live sushi station and sommelier-curated cocktails. Eversheds will be continuing a quarterly programme of women’s events.

Doha, Qatar

21 May 2014

CCME Member & Sponsor Annual SocialA good evening was

had by members and sponsors at the La Spiga, W Hotel, West Bay, Doha. Guests enjoyed international canapes and drinks courtesy of Lexis Nexis and the CCME.

Dubai

14 May 2014

7th Annual Corporate Counsel Forum Middle EastThis annual event was held at Mina A’Salam, Madinat Jumeirah. The 2014 Legal Week Corporate Counsel Forum Middle East discussed opportunities and challenges for corporate counsels in the region as growth returns following the global financial crisis and other issues.

Dubai

15 May 2014

Corporate Counsel Forum Middle East AwardsThe third annual awards ceremony was held at the Dubai Westin Dubai Mina Seyahi.

FUTURE EVENTSTo find out more about planned events, please see http://www.corporatecounsel.me/ or contact the Corporate Counsel Middle East Group at [email protected]

MOVERS AND SHAKERS


PROMOTIONS AT TROWERS & HAMLINSTrowers & Hamlins has appointed new partners in its Dubai, Oman and Bahrain offices. The first is Sallie Bowtell, part of the Real Estate team in Dubai, who acts for developers, public companies and their subsidiaries. She advises on leasing, sales and acquisitions, and general property and development work. Over in Oman, Jamie Gibson, part of the Corporate team, has also become a Partner. He specialises in corporate and commercial law and advises international and local clients. In addition, Peter Greatrex, part of the Real Estate team in Bahrain, is the last new Partner. He specialises in all aspects of acquisition and disposals of both freehold and leasehold properties.

HADEF HOME TO TWO ‘EXTERNAL COUNSEL OF THE YEAR’Two partners at Hadef & Partners have been named as Middle East External Counsel of the Year 2013 by the Asian-MENA Counsel. The recipients are Tarik

El Bakri, Head of Commercial at the firm’s Abu Dhabi office and

Michael Lunjevich, Partner and Head of the Commercial and Real Estate teams in Dubai.

The awards are based solely on the votes and testimonials

of the in-house counsel who took part in the 2013 annual survey conducted by the Asian-MENA counsel. Only ten lawyers are named each year. The other

eight recognised were: Nassif Boumalhab (Clyde & Co), Michael Kerr (Dentons), Abdulaziz Al-Bosaily (Abdulaziz Al-Bosaily in association with Clyde & Co),Salman Al-Sudairi (Latham & Watkins), Samir Kantaria (Al Tamimi & Company),Daniel J Greenwald III (Chadbourne & Parke), Manuela Belmontes (Maples and Calder) and Charles Laubach (Afridi & Angell).

SENIOR PROMOTIONS AT EVERSHEDSEversheds has announced two senior promotions in the Middle East. Ben

Bruton, partner in the UAE’s Dispute Resolution team has

become Head of the UAE practice. Bruton moved to the UAE in 2012, following 12 years practicing in the UK. He

has acted on behalf of a range of international and domestic banks and multinational corporates in litigation and arbitration matters.

In addition, Nayiri Boghossian has been named as Head of Litigation and Alternative Dispute Resolution in the Middle East. Boghossian, a dual qualified multilingual lawyer, has been based in Dubai since 2002. She has experience in litigation and arbitration, as well as serving as an arbitrator with the Dubai International Arbitration Centre (DIAC) and acting as a Domain Name Panelist at the World Intellectual Property Organisation Arbitration Centre.

NORTON PARTNER ON THE MOVENorton Rose Fulbright is expanding its disputes practice in the Middle East by moving London-based Head of Real Estate Disputes partner, Charlotte Bijlani, to Dubai.

Bijlani regularly advises developers,

banks, investors and landlords on a variety of issues and disputes. She also has extensive expertise in the area of actual and potential breaches of contract, distressed developments and debt enforcement.

REED SMITH HIRES NEW CORPORATE PARTNERReed Smith has hired partner Maher Al Mannaee for its Europe & Middle East Corporate Group. Mannaee will be based at the firm’s Abu Dhabi office. Prior to joining the firm, Al Mannaee was legal counsel at the National Bank of Abu Dhabi and Standard Chartered Bank in both Singapore and Dubai. Mannaee has also been a general counsel at the Abu Dhabi Fund for Development and has experience working on cross-border M&A, projects, strategic investments and financings at major UAE institutes.

DLA PIPER ADDS TO EMPLOYMENT TEAMDLA Piper has appointed two new members to the employment team at its Riyadh office. Ammar Alzughaibi is appointed as a Legal Consultant following ten years at telecommunications operator, Etihad Etisalat–Mobily.

Before this, he was Legal Advisor at Alsalam Aircraft Company Ltd and spent four years in Saudi Arabia’s Labour Ministry.The Riyadh office has also hired an additional trainee to support its employment practice.

GRANT THORNTON UAE HIRES AUDIT PARTNERAhmed Badawi has joined Grant Thornton’s UAE office as an Audit Partner. He was previously Assurance Partner at PwC where he was a member of the Global Accounting Consultancy Services and advised on complex accounting issues and implementation and application of IFRS for UK listed clients. In total, Badawi has 19 years’ experience with the Big Four in Cairo, the UK and Qatar, and is US CPA-qualified.

SEND US YOUR NEWSIf you have news of an appointment or promotion within the legal or financial professions you would like to see reported in Lexis Middle East Law, please send details to: [email protected]

OTHER FIRM NEWS

UHY: The global accountancy network has appointed Qatar’s McKenzie Shaw Ltd. The Doha-based firm, which employs a team of 16 staff with four partners, will operate under UHY branding as UHY Ammo & Co. The network has also added Saudi Arabia's Abdul Jabber Certified Accountants and Consultants Office which will operate as UHY Abdul Jabber Certified Accountants and Consultants Office.CMS Cameron McKenna: The firm is opening a new office in Muscat which will initially focus on serving the firm’s energy, projects and financial institutions clients. The extended team in Dubai and Oman will work together, led by partners, Stephen Millar, Matthew Culver, Ben Ewing and Amur Al Rashdi.

Level 14, Boulevard Plaza Tower One, Downtown Dubai, PO Box 334155, Dubai www.jlegal.com Find us on

UAE UAE, london, singAporE, hong kong, mElboUrnE, sydnEy & nEw zEAlAnd

FutureYour

is on the horizon

For these and more roles in the MENA region, please contact Richard McLerie on [email protected] or call on +971 4 455 8419.

Legal Counsel - JLegal Exclusive3+ PQE, Dubai (REM-PM-2510)Our client, seeks a Legal Counsel to join the team in Dubai. The ideal candidate will be 3+PQE and have extensive contract law experience, ideally gained within the seismic, shipping or oil & gas sectors. Lawyers qualified in England and Wales would be preferred, but US, Australian and New Zealand lawyers with the relevant industry experience, will also be considered. Responsibilities will include advising on all legal aspects of bid proposals and tenders; assisting with negotiation on seismic contracts and advising on charter hires, ship agency agreements and other relevant contracts.

TMT/Corporate Associate3-7 PQE, Abu Dhabi (MXY-PM-2484)This top tier global law firm is looking for a mid-level TMT Associate to join their highly-regarded team in Abu Dhabi. The ideal candidate will be an experienced TMT specialist, based within a top tier international or US law firm. You will be a common law qualified lawyer with a strong academic background. Middle East experience is preferred, but not essential. The teams experience includes privatisations and regulatory projects as well as M&A transactions in the communications sector. Commercial work includes, IT outsourcing, telecoms and technology supply and licensing agreements.

In-house Counsel - JLegal ExclusiveSaudi Arabia (JRS-IM-2392)This role is with a leading holding company and will encompass a range of high value transactions including M&A, JVs, real estate and finance, as well as managing litigation via external counsel. The preferred candidate will be US/E&W qualified and will have worked with a well-regarded US or UK law firm for a minimum of 3 years. Candidates must be bilingual in English and Arabic and preferably have some regional experience. The group will pay US rates.

Corporate Associate2-5 PQE, Doha (MXY-PM-2332)The firm advises on some of the most innovative and complex transactions in the region, which is the result of many years’ experience in the Middle East. The ideal candidate will be a mid-level corporate lawyer with strong technical experience (M&A and ECM) gained from a leading international law firm. You will be a common law qualified lawyer with a strong academic background. Middle East experience is preferred, along with Arabic or French language skills, but this is not essential. The firm has a strong presence across the Middle East with expertise in high profile, multi-jurisdictional transactions.

IP/Trademarks Associate1 PQE, Dubai (MXY-PM-2565)The team performs a broad range of high value contentious and non-contentious protection, exploitation and enforcement work on an international scale. Ideal applicants will have gained strong post-qualification experience in trademarks/IP work following on from a strong training contract with relevant seats and impressive academic record. Although not essential, prior experience in the Middle East and /or relevant language skills certainly represents a distinct advantage. The role offers an attractive salary, scope for development and the opportunity to work in a highly reputable team.

Non-Contentious Construction Associate3+ PQE, Abu Dhabi (MXY-PM-2466)The ideal candidate will be 3+ PQE and have excellent training and solid construction experience from a highly regarded UK or international law firm. GCC experience is preferred, but not essential – strong lawyers from the UK, Australia or New Zealand will be considered. The team advises on a wide range of assets across all major industry sectors, with a particular focus on oil and gas, and infrastructure projects throughout the Middle East.

untold PossibilitiesGlobal exPertise and local KnowledGe

19871 Lexis Nexis 210x297 v5.indd 1 07/05/2014 13:06


CONTRACT WATCH

All at sea

GCC maritime law has been relatively static for some time but although these contracts are common

in the region, there are still points to consider. All the GCC countries have separate commercial maritime laws, like Oman's Sultani Decree No. 35/1981, Qatar's Law No. 15/1980 and UAE Federal Law No. 10/1980.They have similarities, including their structure and all came into force in the early 1980s. These laws generally follow a similar theme, as they have tried adapting the most widely accepted international maritime conventions into their respective legal systems along with Sharia requirements. They provide for long established principles like package limitation, action in rem, or general average. However, because these principles are applied within a civil law context with each case judged on its merits, they don't offer the same level of certainty you would find with similar legislation in say English law.

COMMON CONTRACT FORMAs a result of the oil and gas industry’s regional importance, standard maritime and offshore contracts are prevalent here. However, in maritime law there is no such thing as a boilerplate contract form which can be applied to multiple circumstances, so despite how frequently this form of contract is used parties must still choose carefully and amend their form to best suit their needs. There is a

growing tendency to use the Baltic and International Maritime Council (BIMCO) standard form contracts, for chartering, offshore work and construction which have found worldwide acceptance and are well known to the shipping industry in general. One of the widely accepted principles with a clear and easy-to-use rule is the ‘knock-for-knock' principle in supply-time standard forms for offshore contracts. This allows parties to calculate their risks with a degree of certainty. It is usually included in contracts to ensure each party bears responsibility for any damage or loss to their own property, or accident or injury to their own staff, without making a claim against the other party, even if the other party is at fault.

DISPUTE RESOLUTIONIn the UAE, maritime contracts are governed by either UAE law where UAE courts have jurisdiction or English law with Dubai International Financial Centre (DIAC) or Dubai International Financial Centre-London Chamber of International Arbitration Centre arbitrations. However, many maritime contracts refer to arbitration in London under the London Maritime Arbitrator’s Association dispute resolution rules. We find English courts are rarely chosen if at least one of the parties to the maritime contract is GCC-based. However, foreign stakeholders can be concerned about jurisdictional differences in the GCC, so charterers or ship

suppliers, e.g., who have a claim against the shipowner, may choose to arrest the vessel in more ‘arrest friendly’ jurisdictions like Singapore. Arbitration is quite a new concept in the GCC compared to other jurisdictions, and as it needs to be deliberately opted into, most cases are still being handled by local courts. However, where the contract involves internationally based parties or high values – both of which is generally true for many contracts in the shipping industry, especially in the offshore - and oil and gas sectors – we are seeing arbitration clauses being included in contracts more often as you have the option to choose the arbitrator, venue and language of the proceedings but there are also downsides. As disputes are often decided by tribunals with three arbitrators, costs can be substantial, compared to local court fees. Despite this, and especially for maritime claims, arbitration is often still the best choice, as none of the GCC states have so far allotted a separate admiralty or maritime court meaning shipping matters are adjudicated by the civil courts and the judges who generally don't have special training or may not be completely familiar with maritime industry practices.

CONSEQUENCESWhen it comes to choice of law and courts, one issue for maritime contracts, given the extent of technical and industry terms they often have, is that if you are choosing local courts, the language of the court is Arabic. All court documents will need to be translated by a certified translator and the Arabic wording of the translation, rather than the English, will be interpreted by the court.A dispute’s outcome can therefore depend on the quality of the translation which can become a problem given the complexity of the language in the originals.

ContributorCarl Turpin AssociateFichte & Co

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Some databases list over 10,000 laws for the UAE – but not all are in force.

Do you know which ones are? We do.With Lexis Middle East Law, you are shown the current not historic legal position, along with the latest laws, cases, journals and news all at your fingertips. Plus working in partnership with the Corporate Counsel Middle East (CCME) we provide commentary from regional experts, who know and understand what’s happening on the ground.

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Lexis Middle East Law Alert - June /July 2014