GCC Quarterly Review - Q3 2015

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 third quarter of 2015, with links to further reading, where available.

• Download the PDF version (2 pages) or read online below.

Saudi Arabia considers full foreign ownership of retail sector companies: Saudi Arabia is considering relaxing foreign investment restrictions to allow up to 100 per cent foreign ownership of companies operating in the wholesale and retail sector. A Royal Decree issued in September 2015 requires foreign investment regulations and conditions to investment to be reviewed. A joint team from the Ministry of Commerce and Industry and the Saudi Arabian General Investment Authority (“SAGIA”) has been established to carry out the review and an announcement is expected at the beginning of the new calendar year. SAGIA has publicly invited offers from foreign companies wishing to invest in Saudi Arabia, which must include details of future manufacturing plans, transfer of technology and expertise, employment and training. If the rules are changed, international retail companies may be able to establish a direct presence in Saudi Arabia independently and may no longer need to partner with a Saudi Arabian national, who under current rules must hold at least 25 per cent of the business. Companies will be interested to see future developments as to conditions to invest, approvals and financial and tax implications.

The proposed relaxation of restrictions in this area forms part of a general movement of liberalisation in the Saudi Arabia, following the opening up of the Saudi stock exchange to qualified foreign financial investors earlier this year (read more).

Dubai’s new PPP law: Dubai Law No.22 of 2015 on the organisation of public-private partnership in the emirate of Dubai was published in September and comes into force in November 2015. The law is designed to regulate and facilitate development projects between the Dubai Government and private sector organisations across sectors, including infrastructure and public services (but excluding the electricity and water sectors which are separately regulated by Dubai Law No.6 of 2011). The new law signals Dubai’s intent to expand its reliance on private sector finance and expertise in the infrastructure and public services sectors and to transfer risk from the public to the private sector.

The law addresses the approvals and bid processes, together with the terms of the contractual partnership arrangements. Mandatory issues which the partnership contract must address include ownership and transfer of assets, financial and technical obligations, insurance, risk allocation, environmental protection, termination and breach, as well as Emiratization. The partnership contract must be governed by UAE law and, if arbitration is selected as the method of resolving disputes, it must be seated in Dubai. Any project company must be a UAE limited liability company, in which the Dubai Government may take a stake. The sole purpose of the project company must be to undertake the relevant PPP project. Any debt obligations incurred by the project company must be borne by the project company itself. Projects initiated under the law can have a maximum length of 30 years, unless the Supreme Fiscal Committee approves a longer period.

ADGM appoints ADGM Courts and Financial Services Regulatory Authority personnel: Abu Dhabi Global Market (“ADGM”) has made a range of appointments to key positions in the ADGM Courts and the Financial Services Regulatory Authority (“FSRA”), in advance of the formal launch of the new financial free zone in Q4 2015 (read more).

The Right Honourable Lord David Hope of Craighead has been appointed as Chief Justice of ADGM Courts, and Linda Fitz-Alan appointed as Registrar of ADGM Courts. The ADGM Courts is an independent, English language court system, comprising Courts of the First Instance and Appeal, which will have jurisdiction over civil and commercial disputes within ADGM. Following these appointments, the next steps are expected to be taken to develop the courts’ organisation and operational structure (including the appointment of the judiciary) and the completion of ADGM Courts’ regulations and rules (including the detailed scope of the courts’ jurisdiction). Appointments to the ADGM FSRA include Thomas Hirschi as Executive Director of Banking and Insurance and Philippe Richard as the Director of International Affairs. The FSRA will oversee the admission, authorisation and supervision the financial services firms in ADGM and regulate the market to international standards. The FSRA has not yet begun authorising firms, and the ADGM Financial Services Regulations and Rules are expected to be implemented soon, following closing of the consultation in August 2015.

Iran: the next JCPOA milestone approaches: The gradual process of implementation of the Joint Consolidated Plan of Action (JCPOA) between Iran and the so-called P5+1 or E3/EU+3 (the United States, United Kingdom, Germany, France, Russia, and China, together with the High Representative of the EU for Foreign Affairs and Security Policy) relating to limitations on Iran's nuclear programme and the lifting of nuclear-related sanctions continues as “Adoption Day” is currently expected to occur on or around 18 October 2015 (90 days from 20 July 2015 or earlier by mutual consent) (read more).

While there is no immediate change to the position regarding business in, or connected to Iran, Adoption Day is a significant milestone as on that date:

• the EU and its Member States will adopt an EU Regulation to take effect on Implementation Day, suspending the significant majority of nuclear-related economic and financial sanctions;
• the review by the United States Congress of the JCPOA (under the Iran Nuclear Agreement Review Act) should be complete; and
• preparations will begin for Implementation Day, which will occur once the IAEA has verified implementation by Iran of specified nuclear-related measures, on which date some UN and EU, and U.S. sanctions will be suspended.

Our team is following developments closely and has extensive experience of transactions in Iran gained prior to the imposition of sanctions. We have also dealt with numerous enquiries since the JCPOA was agreed and can advise on how to approach potential transactions in the current transitional phase. Members of our team visited Iran recently to update on recent legal developments – these and other issues relating to Iran (including sanctions and the political and security situation) will be discussed at a Linklaters seminar in London on 11 November 2015 (broadcast globally through our webinar facility). Please contact Caroline Cheney if you would like to attend.

FATCA: delayed implementation of withholding: The United States has announced that the timetable has been pushed back for FATCA withholding on gross proceeds (such as US source interest, dividends, sale of assets proceeds to foreign financial institutions (“FFIs”)) and foreign passthru payments (not yet been defined, but broadly meaning payments made to recalcitrant account holders and nonparticipating FFIs by a participating FFI). Withholding is now due to commence from 1 January 2019 in the case of gross proceeds and the later of 1 January 2019 or the date of publication of final regulations defining the term foreign passthru payment in the case of foreign passthru payments. FFIs in the GCC states are exempt from the requirement under FATCA to impose a 30 per cent withholding tax in these circumstances under the terms of the intergovernmental agreement signed, or agreed in substance, between the relevant GCC state and the US (read more).