Upload
nguyentruc
View
219
Download
0
Embed Size (px)
Citation preview
© Simmons & Simmons LLP 2013. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
The inherent risks of doing business in the Middle East from a legal perspective
Andrew Mackenzie
Senior Associate
Dubai, Abu Dhabi
27 May 2014
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
1 / B_LIVE_EMEA1:1762356v1
Resources to assist :
www.elexica.com
elexica
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
2 / B_LIVE_EMEA1:1762356v1
Introduction
The GCC
Specific focus today – the UAE, Qatar and Saudi Arabia
The many sources of law: – The Civil Code – The Shari’ah – Royal Decree
General commercial risks
Business set up and licensing risks
Operating risks
Termination risks
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
3 / B_LIVE_EMEA1:1762356v1
The GCC
The Gulf Cooperative Council (“GCC”)
Made up of Multiple States: – Saudi Arabia; – UAE; – Qatar; – Kuwait; – Oman; and – Bahrain.
A risk to view it as one state or one common area.
Although similarities, there are many differences
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
4 / B_LIVE_EMEA1:1762356v1
Today’s Focus
– The UAE – Qatar – KSA
Opportunities: – The UAE – Expo 2020 – Qatar – Football World Cup – 2022 – KSA – The world’s biggest oil exporter and planned
$400bn infrastructure spend
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
5 / B_LIVE_EMEA1:1762356v1
Sources of Law Qatar and the UAE share a common approach to the
law
– Founded on Civil Code System based loosely on the
Egyptian Civil Code which in turn was based on the
Napoleonic Code
– This is similar to Bahrain, Kuwait and Oman
– Civil vs. Common
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
6 / B_LIVE_EMEA1:1762356v1
The UAE
The UAE Civil Code is among the most advanced legal
systems in the GCC
The UAE itself is made up of 7 Emirates (Federal States)
– Dubai and Abu Dhabi (the Capital) being the two most
prominent of the Emirates
– Each Emirate has its own legal system to a certain extent
existing within a federal state system
– Free Zones
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
7 / B_LIVE_EMEA1:1762356v1
The UAE cont.
– Upcoming Opportunities:
– Expo 2020
– Large infrastructure spend across the UAE – rail, road,
air, power, water etc.
– Large scale mega projects, - Mohamed Bin Rashid
City, Saadiyat island etc.
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
8 / B_LIVE_EMEA1:1762356v1
Qatar
Civil Code similar to the UAE, but not identical
It would be risky to view it as an identical market to the UAE
Capital – Doha
Massive natural gas reserves
Upcoming Opportunities: – 2022:
– $200 billion to be spent on infrastructure – Desire to diversify its economy away from
hydrocarbons
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
9 / B_LIVE_EMEA1:1762356v1
The Kingdom of Saudi Arabia
KSA is different in its own way: – No Civil Code – Primary source of law is the Shari’ah, which is derived
from the teachings of the Qu’ran – Royal Decrees to supplement
Upcoming Opportunities:
– The world’s biggest oil exporter with a planned $400bn infrastructure spend over the next 10 years
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
10 / B_LIVE_EMEA1:1762356v1
Commercial Challenges/Risks Multiple opportunities, but also multiple risks:
– The commercial challenges that face any company entering the market are similar across the GCC:
– Restrictive investment – Difficulties in setting up and acquiring the right type of licence – Tax – it does exist – Difficulties in obtaining work visas – Delays in implementing government procedures – generates
uncertainty – Misinterpretation of the laws and regulations – There is a strong formality to many of the regimes – Nationalisation (Emiratisation / Saudisation) – Enforcement of rights and obligations
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
11 / B_LIVE_EMEA1:1762356v1
Setting Up Shop
Different commercial set ups – Agency;
– Be careful – different states have different approaches – Termination can be costly and difficult
– Joint Ventures – They can be tricky – Commercial realities need to be considered – Local companies – consider ownership
– Branches – Free Zones – See elexica for a comprehensive guide
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
12 / B_LIVE_EMEA1:1762356v1
Operating in the GCC
Ignorance of the law can lead you into trouble…
Taxes
Employment and Immigration
Business Licencing
Common Issues faced …
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
13 / B_LIVE_EMEA1:1762356v1
Contracting – in the UAE Ignorance of the law can lead you into trouble…
Freedom of Contract: – Article 257 –
– The Civil Code recognises freedom of contract: – “the basic principle in contracts is the consent of the
contracting parties and that which they have undertaken to do in the contract.”
– That freedom is restricted to the extent that an agreement will be
unenforceable if it: – Conflicts with mandatory provisions of the law in accordance
with Article 31 – Is contrary to public order or morals pursuant to Article 205(2)
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
14 / B_LIVE_EMEA1:1762356v1
UAE - Useful Civil Code Provisions
Knowledge of the law can help you out of troubling situations:
There are many useful provisions in the Civil Code.
– Focussing on the UAE Civil Code
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
15 / B_LIVE_EMEA1:1762356v1
Validity of Contracts
Article 210 – Void Contracts – “A void Contract is one which is unlawful in its essence
and form, lacking the elements of a contract or defective in this subject matter or purpose or form as laid down by law for the making of a contract, and such contract shall be of no effect and shall not be capable of being rectified by consent.
– Any person having an interest may rely on the voidness of the contract and a judge may so rule of his own motion…”
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
16 / B_LIVE_EMEA1:1762356v1
Contract Interpretation
Articles 258 - 266 – Article 258 – “The criterion in (the construction of)
contracts is intentions and meanings and not words and form” … – “the primary rule is that words have their true meaning
and a word may not be constructed figuratively unless it is impossible to give it its direct meaning”
– Practical Tips – Article 259 – Clear wording – Article 265 - What if not? – Article 266 – doubt “in favour of the obligor”
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
17 / B_LIVE_EMEA1:1762356v1
Unfair Contract Terms and Third Party Rights
Article 248 and 254 – Article 248 – “unfair provisions” – Article 254 – Awards rights to third parties:
“(1) It shall be permissible for a person to contract in his own name over rights stipulated by him in favour of a third party if he has a personal interest, whether material or moral, in the performance thereof.”
What about ‘privity of contract’?
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
18 / B_LIVE_EMEA1:1762356v1
Contractual Set Off
Article 370 – “In the case of mandatory set-off, each of the parties
must be both the obligor and the obligee of the other, and the obligations must be of the same type and description, must be equally due and of equal strength or weakness, and the making of the set-off must not be prejudicial to the rights of third parties, whether the cause of the arising of the obligations is the same or different”
– PRACTICAL TIP – tighten those payment provisions.
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
19 / B_LIVE_EMEA1:1762356v1
Good Faith
Performance in Good Faith – Article 246 “1. The contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith. 2. The contract shall not be restricted to an obligation upon the contracting party to do that which is (expressly) contained in it, but shall also embrace that which is appurtenant to it by virtue of the law, custom, and the nature of the transaction.”
• Practical Tip
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
20 / B_LIVE_EMEA1:1762356v1
Mutual Obligations
Article 247
– “In contracts binding upon both parties, if the mutual
obligations are due for performance, each of the parties may refuse to perform his obligation if the other contracting party does not perform that which he is obliged to do.”
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
21 / B_LIVE_EMEA1:1762356v1
Payment
Article 885
– “The employer shall be obliged to pay the consideration
upon delivery of the property contracted for, unless there is an agreement to the contrary.”
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
22 / B_LIVE_EMEA1:1762356v1
Termination
Article 218 – Unilateral Termination
“1. A contract shall not be binding on one or both of the contracting parties despite its validity and effectiveness if there is a condition that such party may cancel it without mutual consent or an order of the court. 2. Each party may act unilaterally in cancelling it if by its nature the contract is not binding upon him or if he has made it a condition in his own favour that he has the option to cancel.”
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
23 / B_LIVE_EMEA1:1762356v1
Termination
Article 267 – Termination by Mutual consent
– “If the contract is valid and binding, it shall not be
permissible for either of the contracting parties to resile from it, nor to vary or rescind it, save by mutual consent or an order of the court, or under a provision of the law.”
– Covers Variations too
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
24 / B_LIVE_EMEA1:1762356v1
Termination for non-performance
Article 271
– “It shall be permissible to agree that a contract shall be
regarded as being cancelled spontaneously (automatically) without the need for a judicial order failing performance of the obligations arising there-out, and such agreement shall not dispense with notice unless the contracting parties have expressly agreed that it should be dispensed with”.
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
25 / B_LIVE_EMEA1:1762356v1
Termination for Force Majeure
Article 273 – “1. In contracts binding on both parties, if force majeure
supervenes which make the performance of the contract impossible the corresponding obligations shall cease, and the contract shall be automatically cancelled.
– 2. In the case of partial impossibility, that part of the contract which is impossible shall be extinguished, and the same shall apply to temporary impossibility in the continuing contracts, and in those two cases it shall be permissible for the obligor to cancel the contract provided that the obligee is so aware.”
– Other grounds for termination: defective work, performance being prevents etc.
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
26 / B_LIVE_EMEA1:1762356v1
Compensation for Termination
Article 274
– “If the contract is cancelled automatically or by the act of the
parties, the two contracting parties shall be restored to the position they were in before the contract was made, and if that is not possible, compensation shall be ordered.”
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
27 / B_LIVE_EMEA1:1762356v1
Finally – Limitation of Liability Clauses
Article 296:
“Any condition purporting to provide exemption from liability for a harmful act shall be void.”
Could you exclude limitation of liability clauses? - No
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
28 / B_LIVE_EMEA1:1762356v1
The Civil Code is 453 pages long!
Many other helpful provisions: Joint and several liability Contributory negligence Assessment of Compensation Direct and consequential loss Effective date of performance The unlawful exercise of rights
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
29 / B_LIVE_EMEA1:1762356v1
Disputes
Local Courts vs. Arbitration
This is one of the largest risks in the GCC – The Civil Code – No principle of precedent Choice of Forums:
– Default to the Local courts and litigation; – Substantial RISK – Make sure you have a contract in place and a proper
dispute resolution provision. – Many different ways to frame it. - DIAC, ICC, DIFC
Courts etc.
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
30 / B_LIVE_EMEA1:1762356v1
Other Risks
Anti-corruption (FCPA, UK Bribery Act)
Export controls and sanctions
Civil unrest in certain areas of the GCC and wider Gulf
Boycott of Israel
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
31 / B_LIVE_EMEA1:1762356v1
In Summary
Many risks, but also many opportunities
Do not generalise, every State is different, – Different legal systems – Different procedures – Different regimes – Different goals and aspirations – Different commercial and social pressures etc.
Know the law
Know your contract, know your contracting party
Seek advice if you are not certain, do not assume one size fits all
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
32 / B_LIVE_EMEA1:1762356v1
“The riskier the road the greater the profit.”
Questions?
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
33 / B_LIVE_EMEA1:1762356v1
Simmons & Simmons LLP
© Simmons & Simmons LLP 2014. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated partnerships and other entities.
34 / B_LIVE_EMEA1:1762356v1
simmons-simmons.com elexica.com
elexica.com is the award winning online legal resource of Simmons & Simmons © Simmons & Simmons LLP 2014. All rights reserved, and all moral rights are asserted and reserved. This document is for general guidance only. It does not contain definitive advice. SIMMONS & SIMMONS and S&S are registered trade marks of Simmons & Simmons LLP.
Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and its affiliated practices. Accordingly, references to Simmons & Simmons mean Simmons & Simmons LLP and the other partnerships and other entities or practices authorised to use the name “Simmons & Simmons” or one or more of those practices as the context requires. The word “partner” refers to a member of Simmons & Simmons LLP or an employee or consultant with equivalent standing and qualifications or to an individual with equivalent status in one of Simmons & Simmons LLP’s affiliated practices. For further information on the international entities and practices, refer to simmons-simmons.com/legalresp Simmons & Simmons LLP is a limited liability partnership registered in England & Wales with number OC352713 and with its registered office at CityPoint, One Ropemaker Street, London EC2Y 9SS. It is authorised and regulated by the Solicitors Regulation Authority. A list of members and other partners together with their professional qualifications is available for inspection at the above address.