5 April 2016

GCC Quarterly Review - Q1 2016

The GCC Quarterly Review briefly summarises a selection of the major developments in the laws of the Gulf Cooperation Council ("GCC") region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) in the first quarter of 2016, with links to further reading, where available.

Developments in regulation of public companies in the UAE: The Securities and Commodities Authority (SCA) published a range of instruments relating to the regulation of public joint stock companies (PJSCs) in the United Arab Emirates in February. An SCA circular clarifies the application of the Commercial Companies Law (Federal Law No. (2) of 2015) to PJSCs and requires PJSCs to use the template Articles of Association, including a new template for a PJSC listed on the financial market. The SCA consulted on a draft regulation on the issuance and offering of shares in Public Joint Stock Companies for consultation (Regulation No. 20164). It applies to UAE PJSCs and foreign public joint stock companies wishing to list in the UAE. Some provisions restate existing law and practice. Others govern a range of topics which were left open to further regulation by the SCA in the Commercial Companies Law 2015, including trading pre-emption rights and bookbuilding. The Regulation sets out conditions to listing for UAE PJSCs and additional conditions for IPOs on conversion and foreign companies, including a minimum subscription and working capital requirements, plus limitations on to offers other than to "Professional Investors". The timescales for SCA approval of the prospectus are now shorter, with a maximum period of 40 days. Any revised Regulations issued following the consultation would benefit from greater clarity on issues such as requirements for an incorporation, conversion or greenfield IPO and the bookbuilding process (including when pre-funding is required). The SCA is also proposing amendments to Federal Law No. (4) of 2000 on the Emirates Securities and Commodities Authority and Market and to the investment funds regime.

New DIFC route to enforce foreign court judgments in the UAE: The DIFC Court of Appeal has opened up the possibility that the DIFC Courts may be used as a means to enforce foreign court money judgments onshore in Dubai in DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC (CA 007/2015). The DIFC Court of Appeal overturned the decision of the Court of First Instance (CFI-043-2014), relying on a wider interpretation of the scope of the DIFC Courts’ jurisdictional framework. This issue has been the subject of debate since the judgments in 2015 which confirmed that the DIFC Courts could be used as a conduit to enforce foreign arbitral awards onshore in Dubai (Read more...).

The DIFC Court considered its jurisdiction to enforce a judgment of the English Commercial Court, in circumstances where there were no assets in the DIFC against which to enforce. The DIFC Court of Appeal clarified that the DIFC Court has jurisdiction to ratify a money judgment of a “recognised” foreign court even where there was no connection with the DIFC (the English Commercial Court is a recognised court for these purposes). Once ratified, the foreign court judgment is effectively converted into a DIFC Court judgment, which may then be enforced against assets within the DIFC (if there are any) or referred to another court for enforcement against assets outside the DIFC. Where the assets are in Dubai, the DIFC Court judgment may be referred to the Dubai Courts for enforcement and should, in theory, be enforced without review of the merits under the reciprocal enforcement regime between the DIFC Courts and the Dubai Courts. No enforcement application has yet been made to the Dubai courts in this case.

The effect of the judgment is that parties should now have an additional procedural option for enforcing foreign court money judgments in Dubai (and possibly the wider UAE and Middle East region). If it proves effective in practice, this route may allow parties to bypass the challenges inherent in enforcing directly in the Dubai Courts by taking the additional procedural step of first obtaining a judgment from the DIFC Courts. It may change the landscape for parties’ choice of
jurisdiction in the context of international cross-border transactions with a nexus to Dubai, possibly reducing the enforcement risk where English courts are chosen as the dispute resolution forum. However, existing favoured choices of forum (such as the DIFC Courts or arbitration) may remain for other types of transactions. This is a developing area of law. It remains to be seen how the market and the Dubai Courts will react to the decision.

Saudi Arabia consults on draft Companies Law regulations: The Ministry of Commerce and Industry has issued draft regulations for consultation on the establishment and regulation of companies under the new Companies Law (1437H/2015G). The draft regulations, in the form of a Ministerial Decree, include guidance on the form of memoranda of association and articles of association of local companies. The law and accompanying Ministerial are due to come into
force in May 2016. (Read more…).

Oman proposes to ease foreign investment restrictions: The Ministry of Commerce and Industry in Oman is developing a revised foreign investment law, in cooperation with The World Bank. The draft law, if enacted, is intended to replace the existing Foreign Business Investment Law of 1974. Current proposals are to permit 100 per cent foreign ownership of local businesses (currently restricted to 35 per cent.) and to remove the minimum capital requirement for investment. The draft and the timescale for implementation have not been published. Foreign investment restrictions are a common GCC Quarterly Review – Q1 2016
feature of the business environment across the Middle East, and the subject of liberalisation discussions in several countries, including Saudi Arabia and the UAE (Read more…).

New SCA investor relations requirements for UAE listed companies: Companies listed on UAE financial markets are subject to greater regulation on investor relations management, following new rules that came into effect on 1 January 2016. Amendments to the Ministerial Resolution No (518) of 2009 on Governance Rules and Corporate Discipline Standards set out annual primary and secondary requirements for listed companies in managing investor relations, which require the company to establish and maintain an Investor Relations function and publish information about the company and its financial standing. The aim is improve communication and transparency in international investor relations. This development may help to prepare the UAE market for a possible future upgrade from Emerging Market status by MSCI, the index provider tracked by investors.

New rules require public disclosure of ultimate owners of unlisted UK companies: From April 2016, UK companies and limited liability partnerships (LLPs) must maintain a public register of persons having significant control over them, known as a PSC register. The regime is particularly concerned with identifying global individuals or governments who ultimately control UK companies and LLPs, including individuals, sole corporations, governments or government bodies/authorities or international organisations. Non-UK legal entities (e.g. foreign companies) will not be recorded in the register unless one of the above category of persons holds an interest in the UK company or LLP through that non-UK legal entity. The person must satisfy one or more of 5 criteria in order to have significant control. This may be relevant for entities in the Middle East with interests in UK companies or as they may be required to disclose personal data. Investors need to consider now whether they might need to be registered as a PSC of a UK company or LLP and what this will mean for them. UK companies are expected to start sending notices requesting information soon to persons they suspect are PSCs. (Read more…).

New contractual bail-in language needed for local law financing documents?: The 2014 European Bank Recovery and Resolution Directive (BRRD) imposes rules on European banks and most investment firms to insert contractual recognition of bail-in language into their contracts which are governed by the law of a jurisdiction outside the European Economic Area (EEA). This requirement under Article 55 of the BRRD potentially applies to a wide range of liabilities under financing documents which are governed by, for example, the laws of a GCC state (such as a UAE law governed facility agreement entered into by a UK bank). It applies to liabilities “issued or entered into” after 1 January 2016. The BRRD provides a framework for the recovery and resolution of those banks and investment firms. The bail-in language should give the EEA national authorities confidence that the exercise of a bail-in measure of a non-EEA law liability would be recognised and effective in the relevant jurisdiction. (Read more…).

UK Bribery Act conviction relating to Abu Dhabi project: UK-based construction and professional services company Sweett Group PLC has been convicted of failing to prevent an act of bribery (contrary to the UK Bribery Act 2010) and ordered to pay £2.25 million. Sweett Group PLC's subsidiary made corrupt payments to an influential director of Al Ain Ahlia Insurance Company to secure the award of a contract with AAAI for the building of the Rotana Hotel in Abu Dhabi. (Read more…).