Legal Perspectives on Doing Business in the Middle East: By Fulbright & Jaworski L.L.P.

Transcription

1 Legal Perspectives on Doing Business in the Middle East: FOCUS ON SAUDI ARABIA AND THE UNITED ARAB EMIRATES By Fulbright & Jaworski L.L.P. SAM EVERSMAN MARK BISCH May 2012

2 GCC Market GCC Country Population* (July 2012 est.) % GDP * (USD Billions) (2011 est.) % Bahrain 1,248, Kuwait 2,646, Oman 3,090, Qatar 1,951, Saudi Arabia 26,534, U.A.E. 5,314, Total 40,785, , * As of April 2012 Source: Central Intelligence Agency ( 2

3 GCC is Not One Country Different from the West in many respects: legal, cultural, etc. Criminal liability associated with certain commercial matters Regional managers and regional offices good Assumption by home office that all GCC is the same not good Example: The term sheet for Saudi Arabia that assumed 51% Saudi ownership was required. 3

4 GCC is Not One Country Source of Laws Saudi Arabia Shari ah law based on the Holy Qur an and instructions of Prophet Mohammed (PBUH) Specific laws have been adopted for specific subjects Other GCC Countries Civil Code basis; UAE most complicated, Emirate-by-Emirate laws plus free zones 4

5 Confusing Terms Sponsor (what is really intended) Sleeping partner (bad) Establishment Independent contractor 5

6 GCC is Not One Country Commercial Agents Rules vary on when an agent is required What type of agent: commercial agent vs. distributor All agents enjoy some protections, but in Saudi Arabia the agent has no right to compensation for non-renewal or termination; UAE more agentfriendly Tip: Do not appoint master agents for entire region, approach country by country 6

7 GCC is Not One Country To JV or Not to JV Legal Requirements Professional Activity Engineering Consultancy Trading Activity Customer Requirement Commercial Realities Customer Preference Existing Relationships or Contract Obligations 7

8 GCC is Not One Country Branches Kuwait does not allow branches, must use contract agent or form company Other countries allow branches (not to trade) Qatar, branch to perform government contract Saudi Arabia, no representative office, but TSO available for some businesses Saudi Arabia does not require a sponsor/local agent 8

9 GCC is Not One Country Establishing a Local Company Saudi Arabia allows 100% foreign ownership except for trading (75%) and certain restricted activities Qatar and UAE require 51%, but profits can vary So, case by case. but never cheat (no concealment). Free Zones dominate landscape in the UAE 9

10 GCC is Not One Country Taxes UAE is tax free jurisdiction Saudi Arabia and other countries are not tax free, subject to tax treaties 10

11 GCC is Not One Country Employment and Immigration Specific rules vary from country to country (Saudiization compared to Emiratization) General rule: residence work visa required to work in the country Tip: Manage dual-employment relationships; multiple residency for regional employees 11

12 Disputes Are Local Courts Fair? Quick? Sophisticated? Fair, but slow Growing in sophistication More regular use of experts NOTE ALSO: Limited discovery, witnesses, document production; in Arabic Small debt recovery often not feasible (e.g., no recovery of fees or expenses) Is Local Law Unfavorable to Foreign Party Defendants? Low damages exposure/beneficial place to defend Only real choice for many subjects (e.g., JV corporate governance matters) No precedent; government ministry discretion 12

13 Disputes Litigation v. Arbitration Historically, litigation usually is the right answer due to court supervision issues Enforceability of Foreign Awards & Judgments NY Convention, but... 13

14 US and Other Regulatory Issues Anti-Corruption (FCPA, UK Bribery Act) Export Controls and Sanctions US Anti-boycott Regulations Tax Labor Overlap with local laws, anti-corruption and export controls for example 14

15 UAE Hot Topics Anticipated Legislative Developments (Companies Law, Competition/Antitrust Law) Opt-in DIFC Court Jurisdiction 15

16 Saudi Hot Topics Saudiization hire Saudi requirements New Regulations Mortgage Law, Arbitration Regulations, Anticorruption Commission 16

17 Fulbright in the Middle East Dubai Contacts Mark Bisch John Boehm Richard Devine Hassan El-Sayed John Lonsberg Philip Punwar Jonathan Sutcliffe Fulbright & Jaworski L.L.P. Festival Tower, 24 th Floor Dubai Festival City P.O. Box Dubai, United Arab Emirates T: F: dubai@fulbright.com Riyadh Contacts Mohammed Al-Ghamdi Sam Eversman John Lonsberg Paul Fitzgerald Shea Haass Paul Lockyer Richard Tyner Mohammed Al-Ghamdi Law Firm In Association with Fulbright & Jaworski L.L.P. Olaya Main Street P.O. Box Riyadh 11573, Saudi Arabia T: F: riyadh@fulbright.com 17