Issue 334 I October 2020 Latest Legal News and Developments from the MENA Region
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Issue 334 I October 2020 Latest Legal News and Developments from the MENA Region
BUSINESS DEVELOPMENT
& MARKETING DIRECTOR
Barbara Koenen-Geerdink
b.koenen@tamimi.com
LEGAL EDITORIAL
COMMITTEE CHAIR
Mark Brown
m.brown@tamimi.com
SPORTS & EVENTS
PUBLICATION AND
CREATIVE LEAD
Shriya Sanjeev
s.sanjeev@tamimi.com
MANAGEMENT
LEGAL EDITOR
Siobhan Farrell
s.farrell@tamimi.com
EDITION
FOCUS ARTWORK
Saif Zulfiqar
saifzk.01@gmail.com
FEDERAL GAZETTES
Zane Anani
z.anani@tamimi.com
TRANSLATION
Vincent Percival
v.percival@tamimi.com
For more information on Law Update
info@tamimi.com
www.tamimi.com
The contents of Law Update are not intended to be a substitute for specific legal advice on any individual
matters. No part of this publication may be reproduced, distributed, or transmitted in any form or by any
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permission is granted by the firm. For more information, please contact us.
Al Tamimi & Company © 2020
SAMER QUDAH
Managing Partner
s.qudah@tamimi.com
Welcome to October’s issue of Law Update. Following a global boom in live streaming services, as a result
of COVID-19 and the increasing demand for digital services,
This month we focus on Sports & Events Management. The our Corporate Structuring team shares advice with media
world before COVID-19 seems a long time ago and 2020 so far companies who are looking to boost their live streaming
has been a year of true monumental disruption, particularly for services in the UAE and what the setup of those companies
the global sports and events sector. Mass participation events, should look like.
concerts, football matches and competitions of all description
have had to take a back seat while health and community Staying with our Corporate Structuring team, we address
safety issues have come to the fore. a recently issued Cabinet Resolution No. 50 of 2020 on
the regulation of the Procedure of the Real Beneficiary
No one could have imagined a year ago that major events (‘Resolution 50’). This is a ‘beneficial ownership’ regime
like the Tokyo summer Olympics as well as Expo 2020 would regarding the ownership of legal entities and is a critical tool
be postponed. Also the concept of tourism – let alone sports in combatting tax evasion, corruption, money laundering, and
tourism – subsequent to the cancellation of major (sports) the financing of terrorism in the UAE (page 19).
events and conferences has been redefined in the wake
of the pandemic. Quite apart from the human costs of the Lastly, our UAE Employment team addresses the new norm
pandemic, the economic impact in terms of devastating job of working from home. Is it a concept that is here to stay or
losses, lost broadcasting revenues, gate receipts, sponsorship just a stop gap during these unchartered times? The historical
funding and vital footfall for travel, tour, hospitality and other stigma of working from home is analysed pre- and post-
symbiotic sectors has left event organisers and venues pandemic with employers expected to update their workplace
amongst those scrambling to plot a course forward. practices to allow for working from home to be accepted
without challenge (page 25).
IN
This year, the previously booming sports industry has suffered
a significant downturn in global revenue. Nonetheless, the This month our Jurisdiction Updates touch on a number
resilience and importance of the sports industry in the UAE of interesting subjects. Our Qatar office examines whether
have shone a light as we navigate past coronavirus. Specifically, Qatari law provides adequate remedies for creditors seeking
the UFC’s Fight Island, hosted on Yas Island, was one of the first recovery from insolvent/under liquidation debtors and
major events to re-emerge. Likewise, as you are reading this, the conditions under which Qatari courts may pierce the
the UAE is playing host to the IPL T20 Cricket Tournament and corporate veil (page 29). Remaining in Qatar, our commercial
we see the Abu Dhabi Formula 1 event is slated on the 2020 team takes a look at the new PPP law which aims to enhance
FIA calendar, while many other host cities have been unable the productivity and sustainability of national projects in a
to host races this year. There have been significant challenges, cost efficient manner. The financial involvement of the private
THIS
but as our window into the sports sector indicates, there are sector in public projects is viewed as a way of developing and
green shoots and a number of reasons to believe we will see a supporting the local economy (page 31).
strong return to form in the coming months.
Finally, members of our Turkey Desk review the recent update
It is difficult to ignore the impact COVID-19 has had (and still to the Trademarks law which suggests that applications filed
has) on so many sectors; both positive and negative. Our through the Madrid System and national applications filed
expert teams examine the lessons that have been learned and directly before the local trademark office should be treated
offer insights on how business may look going forward. equally especially in terms of refusal grounds, including a refusal
based on an opposition action by any third party (page 35).
Starting with our Construction & Infrastructure sector, our
lawyers consider some short-term steps which contractors I hope you enjoy this issue and welcome any questions or
ISSUE
and sub-contractors can take to manage and mitigate the thoughts you may have.
risks posed by the pandemic as well as anticipate the potential
longer term repercussions of the pandemic (page 13).
Judgments Sports & Events Management
What are the rights of a bona fide Tailoring the scope of arbitration
purchaser where a prior contract
has been invalidated?
9 agreements: A recent judgment of
the Abu Dhabi Court of Cassation
11 The show must go on 39 Sports law in the age of COVID-19 41
Navigating event cancellation in a
47 Identifying and addressing sport
51
General Post-COVID era specific risks in COVID-19 era
Corporate Structuring
Construction & Infrastructure
Managing commercial risk in 13 Requirements to disclose real
19
construction contracts
beneficial ownership of companies
in the UAE
Kuwait's return to the IOC:
overview of sports law in Kuwait 57 Virtual advertising:
now you see me, now you don’t 63
Corporate Structuring Employment & Incentives
Live streaming services in the UAE
Questions of licences and locations
23 Remote working: here to stay in the
UAE?
25
UAE Federal Gazette 66
Jurisdiction Update Webinars 67
Qatar Qatar
Firm Profile 68
Piercing the corporate veil:
Qatari law perspective
29 Positive, progressive and promising:
Qatar introduces a PPP law
31
Turkey
Turkey: opposition to trademark
applications under the Madrid 35
System and the non-use defence
Judgments Judgments LAW UPDATE 9
As a result, in the absence of express legislative to the purchaser was valid by two collateral
provisions the courts have applied the Sharia pillars - each supporting the other: (1) the valid
of the Maliki school. According to this school, a act conveying title; and (2) the registration
What are
tainted (void) sale contract shall be validated if procured pursuant to such a valid act.
a new valid sale contract is performed.
Finally, it is notable that in arriving at its
the rights of
decision, the Abu Dhabi Court of Cassation
reversed the judgment on the same property
Court judgment
a bona fide
by Federal Supreme Court (Case No. 161 of
The Abu Dhabi Court of Cassation ( judgment 2020). It based its decision on the good faith
Ahmed El Shaer 136 of 2020 dated 30 June 2020), ruled that of the Third Respondent who relied upon
purchaser
Senior Associate while the grants of certain property to a seller the seller’s established and registered title
Litigation at the relevant municipality and who was
a.elshaer@tamimi.com (‘Second Respondent') were void, the Second
where a prior
Respondent’s subsequent sale of the property not a party to the action of the nullification
to a purchaser (‘Third Respondent’) was valid. of the testamentary grant which was filed
several years after his purchase, registration,
contract
As a result, although the initial contract to the
This article discusses the rights of a bona possession and significant development of the
Second Respondent was declared void, the
fide purchaser in the UAE in relation to a land subject property. As a consequence, the Court
Third Respondent could not be compelled to
has been
purchase, in light of a recent judgment of the of Appeal held that the status quo existing
return the property.
Abu Dhabi Court of Cassation (Judgment 136 prior to the Second Respondent’s sale to the
of 2020), which considered whether a final It is notable that the Third Respondent, who Third Respondent was impossible to restore
invalidated? court judgment that invalidates a sale of land was presumed to have acted in good faith, and therefore, the sale contract was valid.
will result in the nullification of a subsequent had purchased the property in question in This view is correct as a matter of law and is
transaction involving the same piece of land. 2010 based on the seller’s registered title to sufficient in and of itself to dismiss the action
the property with Abu Dhabi Municipality to overturn the sale to the Third Respondent.
(‘First Respondent').
Relevant UAE law The Third Respondent’s purchase contract
was also registered with Abu Dhabi
Conclusion
The UAE Civil Code does not expressly
address situations where a bona fide Municipality. The sale had taken place prior In this case, the Abu Dhabi Court of Cassation
purchaser of real property, pursuant to a valid to the Appellant’s court case in which the established that the bona fide purchaser’s
contract whilst being unaware that an earlier grants were declared void in 2013. As a result, deed was controlling because he bought
contract for the same property, has been the court decision had no effect on the sale the land for value and had no notice of the
invalidated by the courts. However, Article 1 to the purchaser. Appellant’s interest in the land. The court
of the UAE Civil Code provides: acknowledged that contracts registered
The Appellant could not provide proof that the
before a judgment invalidating a grant of a plot
“The legislative provisions shall apply to land generated any income while it was vacant.
would still be valid.
all matters dealt with by those provisions The Court of Cassation also noted that the
in the letter and in spirit. There shall be Applying the same reasoning, a mortgage on
purchaser or a mortgagee shall be deemed a
no innovative reasoning (ijitihad) in the the land sold to a bona fide purchaser would
bona fide purchaser, if:
case of provisions of definitive import. not be impaired where an earlier contract
If the judge finds no provision in this 1. the transaction to the purchaser/ transferring the property had been invalidated.
Law, he has to pass judgment according mortgagee took place prior to the
This is a positive outcome as it will ensure
to the Islamic Shari’ah. Provided that issuance of the judgment that
certainty in transactions, guarantee the
he must have regard to the choice of invalidated the earlier contract (the bona
authenticity of official documents and
the most appropriate solution from the fide purchaser therefore would not have
reassure property investors and banks
schools of Imam Malik and Imam Ahmad notice of the earlier contract); and
bin Hanbal, and if none is found there, 2. such transaction (either sale or
then from the schools of Imam al-Shafi’i mortgage) is registered at the concerned
Law Update Judgments aim to highlight recent and Imam Abu Hanifa as most befits.
significant judgments issued by the local
department before the case to invalidate
courts in the Middle East & North Africa. Our If the judge does not find the solution the earlier contract is commenced.
lawyers translate, summarise and comment on For further information, please contact
these judgments to provide our readers with
there, then he must render judgment in Thus, a judgment that nullifies an earlier
an insightful overview of decisions which are accordance with custom, but provided Ahmed El Shaer (a.elshaer@tamimi.com).
contract will not be deemed authoritative
contributing to developments in the law. If you that the custom is not in conflict with
have any queries relating to the Law Update
against a bona fide buyer or the creditor
Judgments please contact info@tamimi.com.
public order or morale, and if a custom mortgagee. In this case, the title transfer
is particular to a given emirate, then his
judgment will apply to that emirate.”.
Judgments Judgments LAW UPDATE 11
the service charges and community fees. The arbitration clause should not be entertained.
Defendant failed to pay these charges and fees The Court of First Instance stated, in response
and so the Claimant initiated court proceedings that: “Clause 25 of the SPA is an arbitration
Tailoring
for recovery of the outstanding amounts. clause that specifically and expressly provides
for the jurisdiction of the Arbitral Tribunal to
the scope
resolve any disputes which may arise out of the
The Court of First Instance SPA, after an attempt at amicable settlement,
and defines a mechanism for arbitration and
of arbitration
The Defendant argued that the claim should
the appointment of arbitrators.”
be dismissed on the basis of the arbitration
Saifedin Mahgoub Nagar clause contained in the SPA. The Court of First The Court of Cassation held the Court of
agreements:
Senior Associate Instance dismissed the case. Appeal’s reasons were an insufficient response
Litigation to the Claimant’s plea. This was because, while
s.mahgoub@tamimi.com
the SPA undisputedly contained a dispute
A recent The Court of Appeal resolution clause providing for the referral
of disputes to arbitration, the declaration
judgment
The Claimant appealed the Court of First
Introduction Instance judgment. The Court of Appeal
appended to the SPA contained a specific rule,
in which the parties agreed to submit certain
In a recent judgment, the Abu Dhabi Court of upheld the Court of First Instance judgment matters under the SPA to the courts.
of the Abu Cassation considered the scope of the parties’
arbitration agreement, and in particular the
and rejected the appeal.
In its judgment, the Court of Appeal highlighted
Clause 11-5(b) of the Declaration read: “The
Purchaser acknowledges and understands
Dhabi Court
extent to which the parties intended to submit
that the SPA contained an arbitration clause. that whilst the Service Charges and/or
all disputes thereunder to arbitration. In this
The clause indicated that the arbitration Community Fees and other monies due under
case, while the parties’ agreement (a Sale
of Cassation
tribunal had jurisdiction to settle all disputes the Declaration may be due and payable by
and Purchase Agreement ‘SPA’) contained
arising out of the SPA after exhausting all the Purchaser, the Seller or the Seller’s Affiliate
an arbitration clause, a specific exception to
means of amicable settlement. The clause shall be entitled pursuant to the Declaration to
arbitration was made in a separate declaration
specified the arbitration procedure along with charge a reasonable penalty on late payment
which was appended to the SPA. The clause
the method of appointing the arbitrators. and/or place a charge on the Purchaser’s
in the declaration excluded disputes arising
in relation to service charges and community The Court of Appeal did not engage with the property title (if any) and/or commence court
fees, which thus fell within the jurisdiction Claimant’s argument that the Defendant proceedings for recovery of the amount due.”
of the courts. The Court upheld the parties’ was required to pay the service charges In the Court’s view, since the particular
agreement to exclude such disputes from and community fees in accordance with the derogates from the general, the foregoing
the arbitration agreement, based on the Declaration appended to the SPA, which the was binding on the parties. This express
general principle that special rules apply to the Claimant argued formed an integral part of the agreement evinced an intention to submit to
exclusion of general rules. SPA, failing which it was entitled to commence the jurisdiction of the courts in any dispute
court proceedings as an exception to the which may arise between the parties regarding
arbitration clause in the SPA. service charges and community fees.
Background The Court of Cassation also held that the
The Claimant, a real estate development judge must interpret the contract according
Court of Cassation judgment
company incorporated in Abu Dhabi, filed a to its plain language, without departing from
case against the Defendant, an Abu Dhabi The Claimant appealed the decision of the the meaning borne out by the contract or
registered investment holding company, for Court of Appeal to the Court of Cassation and going beyond what the parties had intended
unpaid service charges and community fees requested the case be remanded to the Court or contemplated at the time the contract was
owed to it by the Defendant. of First Instance made.
Pursuant to the SPA, the Defendant had The Court of Cassation overturned the Court The Court of Appeal thus erred in its
an obligation to pay service charges and of Appeal’s judgment and rejected the first interpretation of the SPA, which it had
Law Update Judgments aim to highlight recent community fees to the Claimant upon the instance ruling. construed contrary to the parties’ agreement.
significant judgments issued by the local receipt of the unit of property that was sold Its ruling was accordingly flawed. Furthermore,
courts in the Middle East & North Africa. Our In its judgment, the Court of Cassation held
to the Defendant. In the event of a delay in the Court of First Instance had not considered
lawyers translate, summarise and comment on that the Court of First Instance ignored
these judgments to provide our readers with payment of such fees, the Claimant had the the merits of the dispute and has not,
established facts. It was clear from the record
an insightful overview of decisions which are right to impose delay penalties. Both parties therefore, determined the dispute over which it
contributing to developments in the law. If you that the Claimant had asserted, before the
agreed that the courts had jurisdiction to had jurisdiction.
have any queries relating to the Law Update Court of First Instance, that the plea of an
Judgments please contact info@tamimi.com. decide any dispute related to the recovery of
12 LAW UPDATE Judgments Construction & LAW UPDATE 13
Infrastructure
The court held that arbitration is an exception to the
court’s jurisdiction and the arbitration clause should
be construed narrowly. Managing
commercial
Commentary
Although the Court of Cassation respected The Court’s decision is to be welcomed. While
risk in Steven Graham
construction
the agreement to arbitrate, it also protected obviously confined to the specific facts of the Associate
Construction & Infrastructure
the jurisdiction of the courts to the extent case, it suggests that under UAE law parties
s.graham@tamimi.com
contracts
the parties had agreed to limit the scope are generally free to tailor their arbitration
of the arbitration agreement. Applying the agreements to include and exclude certain
rule, lex specialis derogate legi generali, the disputes.
court decided that as long as an agreement
The Court of Cassation confirmed that Background
between parties contained a special rule that
arbitration is an exception to the competence As is the case for many sectors, 2020 has been
excluded certain matters from the scope of
of the ordinary courts with respect to civil and a turbulent one for the construction industry in
the arbitration agreement such a rule should
commercial disputes. The arbitration clause the region. COVID-19 and the economic fallout,
apply irrespective of an arbitration clause,
however must be clear, explicit and exhaustive the extent of which is yet to become clear,
provided that the agreement is both clear and
in it terms if it is to exclude the jurisdiction of continues to disrupt the industry in the short
explicit. Hence, the Court held that the parties
the courts. term but the impact on 2020 is likely to be felt
to the agreement to circumscribe the scope
of their arbitration clause, and in doing so, was in the medium and long term.
influenced by the view that as an exception to This article briefly considers some of the
the jurisdiction of the courts such arbitration short term steps which contractors and sub-
agreements were to be narrowly construed. contractors can take to manage and mitigate
Finally, the Court was prepared to enforce the For further information, please contact Saifedin the risks posed by the current situation and
terms of a separate document appended to Mahgoub Nagar (s.mahgoub@tamimi.com). considers what the longer term repercussions,
the main agreement, which it appears to have positive and negative, of COVID-19 may be.
regarded as an integral part of that agreement.
The short term
In the short term, the key consideration for
many in the supply chain will be protecting
cash-flow. This is not a new concern in the
industry and has been the subject of many
articles prior to 2020. Nonetheless COVID-19
has undoubtedly exacerbated this problem as a
result of:
• existing projects being suspended or
terminated;
• employers delaying/failing to certify
payment applications and to make
payments;
• a slow-down in the pipeline of new
projects;
• delays to existing projects;
• increased operating costs; and
14 LAW UPDATE Construction & Infrastructure
• developers calling, in some cases (for costs. Further, where contracts permit only take such assertive action in respect of In negotiating a construction contract, it is
example recent articles in the UAE press) it, video and pictures of progress on a uncontested breaches by the employer (or common for employers to seek to transfer as
publically, for contractors to accept weekly or monthly basis are invaluable breaches that the employer is objectively much risk as possible to the contractor despite
price-cuts on existing contracts which to evidence entitlement to payment unable to justify). the fact that a contractor may be less well
already contain tight margins and tough and refuting questionable Engineer’s placed to manage that risk. In this regard, we
Where the contract is silent as to suspension,
risk profiles. assessments. have seen a tendency for pure construction-
in most jurisdictions in the region the
only contractors being asked to accept
In order to manage this increased risk, more Whilst managing the contract may help applicable civil code will contain a statutory
full design responsibility. In a commercial
important than ever is to ensure that contracts in bringing issues to light and ensuring right to suspend. In the UAE, Article 247 of
environment where procurement decisions
are pro-actively managed at every level of the compliance with the contract so as to avoid the UAE Civil Code provides for suspension in
are often based on landing the lowest price,
supply chain. losing the right to claim, this is only part of the certain circumstances:
contractors are forced to submit a competitive
story as effective contract management it
Pro-active management of contracts draws “In contracts binding upon both parties, bid, which can result in low profit margins. It
does not necessarily help in securing payment.
out potential issues which may give rise to if the mutual obligations are due for follows that that contractor is then even less
Where employers are not prepared to make
payment disputes at an early stage. Most performance, each of the parties may able to absorb the risk. This is increasingly
payments then contractors need to be aware
construction contracts used in the region, refuse to perform his obligations if prevalent in the current market, with
of the potential remedies in their contracts
notably the 1987 and 1999 FIDIC suites, contain the other contracting party does not contractors being asked by clients to re-price
and. at law, seek to use those remedies
provisions for the early notification of any perform that which he is obliged to do.” contracts to accommodate the economic
to secure payments, at least of sufficient
instruction or event giving rise to additional fallout from the COVID-19 pandemic. The
amounts to manage cash-flow pending future When exercising a statutory right, care must
cost. All too often these provisions are either consequences of such pricing are then
disputes final resolution. be taken to ensure that there are performable
ignored or are paid only lip-service which can inevitably passed down the supply chain
mutual obligations and that the breach is
lead to disagreement as to entitlement to This is, of course, a difficult balancing act that (although we are aware of various instances
proportionate to the decision to suspend.
payment and/or the amount due arising long can be challenging for contractors seeking when the underlying forms of subcontracts
Once again, this comes down to the prevailing
after works have been undertaken. to balance the need for payment against have made no provision for this).
circumstances, being able to evidence that the
maintaining commercial relationships with
As part of proactive management of contractual pre-conditions to the obligation However, and notwithstanding the
an eye to future opportunities. That said, it
contracts, two further ‘common sense’ steps to make payment have been met (for example increasingly competitive nature of the
is becoming increasingly common, notably
are vital to being able to support a claim in submission of supporting documents) and that contracting market, contractors should
amongst larger contractors and consultants, to
respect of payment: there is clear evidence of the amount due. nevertheless ensure that the contract clearly
decide not to seek future opportunities from
addresses fundamental issues in respect of
• Firstly, it is important that those employers with a history of failing to honour
extension of time entitlements and additional
managing the contract and making payment commitments.
decisions in respect of it are familiar with The medium term costs (including in respect of the evolving
A contractor’s chief remedy for non-payment, impact of COVID-19), variations, limitations on
and understand the contract. It is still all Looking ahead to new contracts, it seems that
short of termination, is to slow-down liability and dispute resolution.
too common to discover that contracts there is likely to be ever more competition
performance or suspend the works (or, at least,
which contain particular payment and for a limited pool of contracts as a result of Contractors should ensure that the contract
to threaten to do so in part of in full). Some
notification provisions have operated the economic impact of COVID-19 (although makes provision for the following:
contracts contain provisions allowing for such
on the basis of custom and practice or the infrastructure and industrial sectors may
slow-down or suspension in the event of non-
on the assumption that the standard well be exceptions) as well as the pre-existing
payment (for example Clause 69.4 of the 1987
FIDIC 1987 provisions will apply. Where trends in the regional market prior to 2020. 1. Extension of time and additional costs
FIDIC Red Book Contract). Such contractual
this occurs, procedures are inevitably
rights are beneficial to contractors as there In those circumstances, the risk is that a Contractors should ensure that there are
not followed leading to the loss of
is a clear and unambiguous right to slow- “lowest-price wins” approach to procurement clear provisions in the contract that allow
rights to claim (for example due to late
down or suspend in prescribed circumstances will dominate and that contractors will be for an extension of time where there are
notification) and/or statements are made
(specifically in the event of failures to certify asked to accept ever more risk for ever lower delays to the project that are unforeseeable,
or not made which ultimately prejudice
and failures to make payment). When such margins. As discussed below, it is hoped that outside of their control, and/or are not
the contractor’s position.
rights are invoked, contractors must ensure 2020 may provide a ‘reset’ for the industry caused by the contractor.
• Secondly, proper records of costs they have satisfied the preconditions to and lead to a move towards a more balanced In addition to provisions for an extension of
incurred and of any instructions or slow-down performance or suspension (for risk profile, however only time will tell if this is time for such delays, the contract should
occurrences which may give rise to later example notice requirements) and should likely to happen. In the meantime, it is more provide for additional costs to be claimed, and
claims are vital. Whilst most projects ensure they have sufficient evidence of important than ever that contractors have potentially a variation to the contract price.
do keep records, it is important that the employer’s breach to ensure they are a clear understanding of their risk profile
these records are complete, objective, protected from future claims that the slow- and ability to deliver against the same from The interplay between these provisions and
contemporaneous and most importantly down or suspension was not justified. Indeed, the early stages of procurement through to the force majeure provisions, often overlooked
record the information which is: (a) the wrongful slow-down or suspension delivery of the works. in negotiation, should be carefully considered
required by the contract; (b) would be could expose the contractor to significant to ensure there is some right to additional
required to properly evidence a claim for repressions so it is typical that contractor
16 LAW UPDATE Construction & Infrastructure
cost in the event of force majeure events and/
or a right to take action to mitigate or avoid
Only time will tell how The long term to bring about positive changes to the industry
which will set it on a more sustainable course
additional cost being incurred as a result of COVID reshapes the Prior to the unexpected events of 2020, there
was discussion in the UAE and the wider region
for the future.
‘no-fault’ events.
construction sector about the future of the market and the need Of course, the above is speculative and
only time will tell how COVID reshapes the
for a more sustainable model to be adopted.
2. Variations (and indeed the wider Steps have already been taken, for example the
construction sector (and indeed the wider
economy). What is certain is that in these
In the increasingly fast changing market economy). What is Abu Dhabi government’s decision to impose difficult times it is more important than
30 day payments terms on its contracts, to
(not just for construction but for real estate
market and the sectors in which the buildings
certain is that in these move towards a more balanced risk profile, but
ever for contractors to ensure they manage
contracts and so risk effectively but, at
will ultimately be used) effective variation difficult times it is more more remains to be done. the same time, to actively embrace new
mechanisms are crucial. The 2019 report issued by Mashreq Bank opportunities that arise.
Contractors should ensure that they are
important than ever for focused on the potential for change in the
able to notify variations or changes of contractors to ensure UAE construction market to create a more
sustainable model. It focused on: (a) the
circumstances which incur additional cost
and/or time. This may include revisiting force they manage contracts introduction of a more balanced risk profile,
perhaps through the introduction of a standard
majeure provisions, employer’s risks and often
overlooked provisions such as changes in law
and so risk effectively form of contract or via legislation imposing For further information, please contact
Euan Lloyd (e.lloyd@tamimi.com).
and fluctuation provisions (in relation to cost
of materials and labour) as well as considering
but, at the same time, minimum standards on the industry (b)
reviewing dispute resolution procedures; and
who carries the risk for delay and disruption in to actively embrace to ensure that disputes can be resolved more
quickly to aid cash-flow (for example through
new opportunities
the materials supply chain.
the use of a specialist court or adjudication
A further area where contractors can seek
to regain the ability to mitigate risk is in that arise scheme similar to those used in jurisdictions
such as the UK and Australia).
amending variations provisions to require
the cost consequences of instructions Despite the dramatic shift in the current state
to be agreed upon before work has to be of the industry and the economic outlook in
undertaken (save in an emergency). Whilst this lower value disputes arbitration, even adopting the immediate future, the issues identified in
may be difficult to negotiate this is an area in an expedited procedure (for example as that report remain front and centre.
which contractors can seek to improve their provided by the ICC Rules), is unlikely to be cost It is possible that the aftermath of COVID will
bargaining position by securing relatively effective. As a result, many ‘small’ disputes are create greater urgency to move towards a
limited changes to the contract. never resolved and the aggregate loss suffered sustainable model for the industry. No matter
by a contractor over multiple small disputes what level in the supply chain you operate at,
could be significant. it is in no-one’s interest for otherwise viable
3. Penalty Clauses The above issue tends to penalise contractors contractors to be driven out of the market
Contractors should pay attention to the way and sub-contractors rather than employers. due to cash-flow issues reducing the pool
penalty clauses, for example delay damages, In order to mitigate this, it may be possible to of competitive contractors or for ongoing
work with clauses dealing with variations negotiate a tiered dispute resolution provision projects to be threatened by the delays
and force majeure events. Where there is a allowing large disputes to be referred to and complications of a contractor or sub-
justifiable delay the contractor should not be arbitration but providing that below a certain contractor insolvency.
penalised even if the event is not itself the threshold ‘small’ disputes can be referred to If it is the case that public sector contracts
employers ‘fault’. the local Courts, while it is also noteworthy and infrastructure works become a bigger
that certain courts (such as the DIFC Court) proportion of the pipeline of future work in
have small claims divisions. This is by no the next few years, COVID may well provide
4. Dispute Resolution Provisions means a perfect solution, however, it gives an opportunity for the public sector to
contractors a forum which is more likely to expedite change.
With regard to dispute resolution, It has long
be cost effective in which to resolve small
been considered the ‘safe’ option to include Through the adoption of new risk-profiles
disputes. Perhaps more importantly, it keeps
arbitration agreements in construction designed to allocate risk to the party best able
alive the risk of litigation which may bring
contracts. Whilst arbitration undoubtedly to manage that risk and through championing
employers to the negotiating table – without
has some advantages over the local courts in prompt payment the public sector can begin
this, employers can be confident arbitration
certain circumstances, a major drawback is
will not be cost effective and so there is little
the cost involved in arbitral proceedings. For
incentive to resolve matters amicably.Corporate Corporate Structuring LAW UPDATE 19
Structuring
Resolution 58 introduced a requirement for This could be through a chain of ownership
entities in the UAE (with certain exceptions) to of control, or other means such as having the
obtain and maintain appropriate, accurate and right to appoint or remove the majority of the
Requirements
recent information of their real beneficiaries company’s management.
(‘Real Beneficiaries’) as well as update the
If no natural person satisfies the above criteria,
to disclose
authorities in this regard. This legislation
or if there are any doubts as to who satisfies
introduces the beneficial ownership regime
them, then the Real Beneficiary would be the
to the UAE “mainland” and free zone entities,
real beneficial
natural person who exercises control of the
and mandates the maintenance of the relevant
legal person through any other means. If still
registers discussed below.
Izabella Szadkowska Nasouh Raslan one cannot identify such a natural person, then
ownership of
Partner Associate the senior manager of the legal person is the
Corporate Structuring Corporate Structuring Real Beneficiary.
i.szadkowska@tamimi.com n.raslan@tamimi.com Exemptions from application
companies in Resolution 58 applies to all legal persons
incorporated or registered in the UAE, Register of Real Beneficiaries
the UAE Introduction
International organisations and bodies, such as
including its free zones, except for:
1. financial free zone entities, i.e. entities
Under the Resolution, each entity shall
maintain a Register of Real Beneficiaries. The
the Financial Action Task Force (‘FATF’), which in the DIFC and ADGM, that are subject Register shall reference, in respect of the Real
recommends measures related to fighting to the free zone specific legislation Beneficiary(ies):
anti-money laundering and to combatting the concerning beneficiaries (i.e. ultimate
1. name;
financing of terrorism (‘AML/CFT’), and the beneficial owners’ regime);
Global Forum on Transparency and Exchange 2. nationality;
2. companies wholly owned by UAE federal
of Information for Tax Purposes (‘Global or local governments, including the 3. date and place of birth;
Forum’) both support the establishment of companies they wholly own; and
‘beneficial ownership’ regimes. 4. residential or service address;
3. companies wholly owned by publicly
A ‘beneficial ownership’ regime regarding the 5. passport or identity card details;
listed companies that are subject
ownership of legal entities is a critical tool in to transparency and disclosure 6. basis on which that person is
combatting tax evasion, corruption, money requirements, already, under UAE law. considered a Real Beneficiary;
laundering, and the financing of terrorism. It
also allows law enforcement agencies to trace 7. date appointed as a Real Beneficiary; and
the ownership and control of legal entities
Who Is a Real Beneficiary? 8. date ceased to be a Real Beneficiary.
such as corporations, and to “look through” the
Under the Resolution, the Real Beneficiary Where the legal person identifies a person as
different corporate layers to determine who
is a natural person who either has ultimate a Real Beneficiary, it shall give them notice of
are the real (or ultimate) beneficiaries.
ownership, or exercises ultimate control over this. The notice shall include the basis on which
In the past few years, several jurisdictions the person is identified as a Real Beneficiary,
a legal person, directly or through a chain of
around the world such as the European Union their available information, and a request to
ownership or control, or other indirect means.
member states, Hong Kong, and Cayman provide any missing information. If 15 days’
The Real Beneficiary is also the natural person
Islands introduced such regimes. Also, within notice pass without response, then the legal
on whose behalf transactions are conducted,
the UAE, some free zone jurisdictions, such person shall give such notice. If a further 15
or who exercises ultimate effective control
as the Dubai International Finance Centre days passes without a response, then the legal
over the legal person.
(‘DIFC’), Abu Dhabi Global Market (‘ADGM’) person shall record the available information.
and Dubai Development Authority (‘DDA’), In practical terms, the Real Beneficiary is
every person who ultimately owns or controls, The legal person shall update the above
introduced beneficial ownership regimes a
whether directly or indirectly, whether through information in their records accordingly
while ago.
shares or bearer shares: within 15 days of their being informed of such
As part of the UAE’s shift towards greater a change.
transparency, and to be in line with global 1. 25 per cent or more of the share capital; or
standards, the UAE Ministry of Cabinet Affairs
2. 25 per cent or more of the voting rights,
(‘Cabinet’) issued Cabinet Resolution No. 58 of
of the legal person.
2020 on the regulation of the Procedures of
the Real Beneficiary’ (‘Resolution 58’).20 LAW UPDATE Corporate Structuring
The new UAE requirements to maintain a Register Conclusion
of Real Beneficiaries and to lodge the details of the The new UAE requirements to maintain
a Register of Real Beneficiaries and to
Real Beneficiaries, introduce an additional element maintain and, in certain circumstances file
with authorities, the details of Nominee
of transparency into the UAE mainland free zone Board Directors, Trustees, and their
economies. Further to the FATF and Global Forum beneficiaries, introduce an additional element
of transparency into the UAE mainland free
recommendations, the aim of the new legislation zone economies. These are based on the
FATF and Global Forum recommendations.
is to make the UAE jurisdictions, as a whole, more The aim of the new legislation is to make the
robust, more reliable, and operating in line with
UAE jurisdictions, as a whole, more robust,
more reliable, and operating in line with
global standards. global standards. On a global level, such
new requirements assist in combatting tax
evasion, corruption, money laundering, and the
financing of terrorism. The Resolution follows
other related legislation the UAE enacted
Register of Partners / Disclosure Timelines in the recent past such as those concerning
anti-money laundering and economic
Shareholders / Officers The disclosure timelines are as follows: substance requirements. Combined, they
Further, the Resolution makes it mandatory 1. legal persons currently existing in the demonstrate the UAE’s progressive outlook
for all entities to which it applies, to UAE have an obligation to create those and commitment to becoming and remaining
maintain a ‘Register of Partners’ or ‘Register registers and share them with relevant one of the world’s most transparent and
of Shareholders’. The applicable register registrar by 27 October 2020; and competitive places to do business.
shall include:
2. newly incorporated legal persons
1. number and classes of shares, and the will have 60 days from the date of
associated voting rights; incorporation to create and share
2. date of appointment as a partner/ these registers;
member; 3. where the legal person issues shares in For further information, please contact Izabella
the name of a person or board director, Szadkowska (i.szadkowska@tamimi.com)
3. for natural persons: The full name as
the legal person shall have 15 days to or Nasouh Raslan (n.raslan@tamimi.com).
per passport or identification card,
in addition to nationality, address, disclose to the registrar the details of
place of birth, name and place of these shares, as well as the identities of
work, and photocopies of the relevant the recipient; and
identification documents; 4. if the registrar requests any additional
4. for legal persons: Name, legal form information related to the registers, the
and memorandum of association, legal person is obliged to provide this
registered office address, articles information within the time period the
of association and any similar registrar states.
documents, names and particulars of Whilst some registrars have already started
the directors of the entity; and accepting those submissions, the others (e.g.
5. information similar to that the Department of Economic Development
outlined above. for onshore entities) are yet to open for
submissions. At the moment, there are no
The legal person shall have 15 days to update stated fines for incorrect disclosure or for lack
any changes to the information. of disclosure.
Finally, UAE entities are required to maintain
Officers Register, as well.Corporate Corporate Structuring LAW UPDATE 23
Structuring
and commercial registration requirements It is worth noting that the range of activities
relating to doing business in the UAE can that fall under the scope of the E-Media
attract penalties - including fines up to AED Law is broad, but vague. An aggressive, but
Live streaming
500,000 (approximately US$136,000). reasonable, interpretation of the E-Media
Law is that a company that is set up in the
services in the
UAE will need a licence from the NMC if it
wishes to sell audio-visual content of any
If you are doing nature to the public.
UAE: Nazanin Maghsoudlou
business in the Crucially, the E-Media Law requires that the
media company behind the platform has a
UAE, you will need a
questions of
Senior Associate licence if the company is seen to be doing
Corporate Structuring
business in the UAE (including the Free Zones).
n.maghsoudlou@tamimi.com
commercial licence There are no clear criteria that must be met.
licences and from the relevant In general, the regulator will probably regard
your company as actually doing business in the
locations corporate regulator. country if: your platform appears to be actively
You are a media company looking to take marketed to UAE residents or; your platform
advantage of the global boom in live streaming is using servers or other infrastructure that is
services. Naturally, you would like your online physically in the country.
platform to be visible within the United Arab You will also need to consider the requirements
Emirates (‘UAE’). Do you need a licence? of the National Media Council
Should you incorporate a local entity, and, if so, Look at what, exactly, you want to do before
The National Media Council (‘NMC’) is an
what and where? choosing a location and a corporate structure
independent federal government agency
The COVID-19 pandemic has changed the way that regulates traditional and digital media. Aside from the NMC licence, a media company
in which the world consumes live content – and Among others the NMC issues licences that which intends to commence business
possibly forever. Globally, use of live streamed are required under the 2018 Electronic Media activities in the UAE has the option of setting
content rose by a fifth in March 2020 relative Regulation (‘the E-Media Law’). up a presence either “onshore” or in one of
to the preceding two weeks. Daytime (i.e. non- the available “free zones” that have been
There are no specific laws in the UAE
prime time) usage surged by 40 per cent1 . For established throughout the UAE.
that address the distribution of content
companies with live streaming platforms, the
or theauthorisation/licensing of content For an onshore (also referred to as a
opportunities should also have increased a lot
distributors. The E-Media Law does, however, “mainland”) presence, subject to Federal Law
in the UAE and across the region.
address the issue of what will be “Licensable No. 19 of 2018 in relation to foreign direct
Electronic Media Activities”. investment law, foreign media companies
must partner with a UAE national (either
If you are doing business in the UAE, you will The following activities are considered
an individual or a company wholly owned
need a commercial licence from the relevant Electronic Media that must be licensed in
by UAE nationals) 2 . The UAE partner must
corporate regulator advance, even if they are practised through
hold at least 51 per cent of the shares in the
Social Media platforms:
The question that perhaps arises for media onshore company.
companies wishing to extend their reach to 1. websites of trading, offering and selling
By contrast, setting up in a free zone does not
the UAE would be whether or not they are of audio-visual and print material;
require partnering with a national shareholder:
required by law to set up a local entity: the
2. on-demand electronic publishing this makes for a more attractive environment
alternative is to deliver content to the UAE
and printing; for many businesses. There are two types of
consumers from offshore.
3. specialised websites (e-ads, news free zones in the UAE: financial free zones and
As a general observation, foreign investors economic free zones. Currently, the only two
sites, etc.);
wishing to undertake commercial activities financial free zones are the Dubai International
in the UAE need to comply with generally 4. any electronic activity that the NMC may Financial Centre (‘DIFC’) and the Abu Dhabi
applicable foreign investment requirements. determine to add. Global Market (‘ADGM)’. There are a large
This involves being registered and licenced by number of free zones located in each emirate.
the relevant authorities in the UAE. Failure to
comply with the general foreign investment
1
Conviva, Streaming in the Time of Coronavirus, 2020, p2. 2
An onshore (or ‘mainland’) presence is one that is outside of a free zone.24 LAW UPDATE Corporate Structuring Employment & Incentives LAW UPDATE 25
The right corporate To conclude, the right corporate structure and
location will depend on what activities you
structure and location intend to pursue in the UAE.
will depend on what Remote
activities the media
company intends to
working:
here to stay
For further information, please contact Nazanin
pursue in the UAE. Maghsoudlou (n.maghsoudlou@tamimi.com)
Victoria Smylie
or Omer Khan (o.khan@tamimi.com).
in the UAE?
Associate
Employment & Incentives
v.smylie@tamimi.com
Economic free zones are usually industry
specific. In Dubai, the Dubai Development
Authority (‘DDA’) was formed to foster
Dubai’s creative and innovative industries. For many working in traditional office roles
Free zones overseen by the DDA include, prior to the beginning of this year, the concept
amongst others, Dubai Media City, Dubai of “working from home” was foreign. However,
Internet City and Dubai Studio City. Any of due to the recent COVID-19 pandemic it has
these three free zones may be attractive now become the new normal for employees
to international media companies. This is across the world and it begs the question, is
in part because the DDA itself will obtain working from home here to stay in the UAE?
necessary approvals from the NMC when the
companies apply for incorporation.
Legal position prior to the pandemic
The three most widely used corporate vehicles
in the UAE are the LLC, a branch of a foreign Remote working in the UAE is a relatively new
company and a representative office. Choosing concept, as the legal position is that employees
the best vehicle depends on the purpose of the are generally required to work for a specific
company and on the business activities that employer at a specific geographical location
are contemplated. (i.e. an employer’s business premises as set
out in its commercial trade licence). Whilst
Certain media companies may also enter homeworking has been actively encouraged
the market through a distributorship or by the Ministry of Human Resources and
commercial agency, depending on the nature Emiratisation (‘MoHRE’) for onshore UAE
of their contemplated activity, rather than national employees since 2017, previously
through a direct investment. there was no similar recognition for expatriate
In addition to the commercial and NMC employees and the key employment legislative
licences, a media company that intends to framework throughout the UAE (both onshore
operate in the UAE will also need an office and within the free zones (including the Dubai
lease and, probably, registration for Value International Financial Centre (‘DIFC’) and
Added Tax (‘VAT’). Abu Dhabi Global Market (‘ADGM’)) does not
provide for the concept of remote working.
To date (September 2020), some platforms
have been operated entirely from outside However, the position changed dramatically in
the UAE. However, the risks of making live March of this year when the UAE government
streamed content available within the country introduced a number of measures to curb
without proper licensing and documentation the spread of COVID-19, and as a result,
are significant. Violation of federal law employees within both the public and private
concerning companies can result in fines sectors in the UAE were required to work
of AED100,000- 500,000 (approximately remotely, where possible.
US$27,000- 136,000). The NMC may impose
sanctions. The authorities may also block the
online platform.26 LAW UPDATE Employment & Incentives
Legal position following remote working entirely or alternatively, have
introduced atypical working arrangements and
Undoubtedly COVID-19
COVID-19 outbreak
In response to the COVID-19 outbreak,
have amended and/or implemented company has changed the way in
policies reflecting these arrangements. For
the MoHRE released a Temporary Guide public sector employees within the Emirate, which remote working is
viewed and has removed
Regulating the Remote Work in Private the Dubai government has recently introduced
Establishments annexed to the Ministerial a number of innovative measures including a
Resolution No. 281 of 2020, in addition to the
enactment of the Ministerial Resolution No.
flexible working system across all government
departments and a “work from home” policy to
any stigma that may
279 of 2020 which gives an employer (amongst support female employees where their children have previously been
other emergency measures) the explicit right
to request that an employee works remotely.
are undertaking distance learning.
attached to the phrase
A restriction on the number of employees
Whilst both Resolutions were introduced on
a temporary basis, they remain in force, and
on business premises remains within the “working from home.”
Emirate of Abu Dhabi, currently at 60 per
it is yet to be seen whether the MoHRE will
cent occupancy.
extend this guidance beyond the current
importantly for businesses struggling through
circumstances and make permanent legislative
a global recession, a potential decrease in
changes. Application of these Resolutions
varies within free zones however, a number Remote working: the future overhead expenditure. However, it is of course
recognised that not everyone can or wants
of the free zones, such as the Dubai Multi Undoubtedly COVID-19 has changed the way to work from home and future arrangements
Commodities Centre (‘DMCC’), introduced in which remote working is viewed and has will vary. For many, the past few months have
their own guidance or best practice drawing on removed any stigma that may have previously served as a reminder of how much they enjoy
the terms of these two Resolutions. been attached to the phrase “working from social interaction in the workplace, and a return
to the office resembles a sense of normality.
However, with several global household
names such as Twitter and Facebook publicly
There is now an expectation on companies to amend announcing that their employees are free to
work from home indefinitely, the indication
their current workplace practices and policies in order is certainly that remote working will remain a
feature not just within the UAE but worldwide.
to adopt to the new “normal”, retain employees, and There has been a steady increase in recent
attract the best future talent. years of private sector companies allowing
flexible working arrangements for their
employees and this has increasingly been
recognised as an important factor in employee
For employees within the DIFC, the DIFC recruitment and retention. However, this
home”, which for many had connotations of
implemented the Presidential Directive No. 4 general trend has been fast tracked in recent
‘working’ from the sofa in pyjamas. Over the
of 2020 (‘Directive’) which introduced a range months due to the virus and accordingly, there
past eight months, employees have been
of emergency employment related measures, is now an expectation on companies to amend
able to successfully demonstrate to their
one of which was to impose remote working their current workplace practices and policies
employers that they can work in an efficient
conditions and requirements on employees. in order to adopt to the new “normal”, retain
and productive manner outside the four walls
The Directive was however formally revoked employees, and attract the best future talent.
of their office, helped significantly of course
as of 31 July 2020 and there have been no by modern day technology. Specifically, As this is a developing area of the law, it is
further legislative amendments announced for the UAE, remote working has seen the important that legal advice is sought to ensure
by the DIFC to date. No additional measures introduction/expansion of videoconferencing that any applicable remote working policies are
or directives have been implemented in the platforms like Zoom and Microsoft Teams. consistent with local laws and practice.
ADGM to date.
Recent months have also highlighted a number
In the Emirate of Dubai, it has been permissible, of additional benefits to remote working and/
since June, for companies (both onshore and or atypical working arrangements including
within the free zones) to operate at 100 per employees reporting higher job satisfaction,
cent capacity however, despite this, many increased work/life balance, greater flexibility,
For further information, please contact
private sector companies continue to operate elimination of tiresome commutes and
Victoria Smylie (v.smylie@tamimi.com).You can also read
