Author: afridi-angell

Anti-corruption regulation (UAE chapter) 2021

This edition of “Anti-Corruption Regulation 2020”, provides local expert opinions in key areas of law, practice and regulation for corporate counsel, cross-border legal practitioners, and company directors and officers. This chapter focuses on the United Arab Emirates and addresses topics from; international and domestic law, foreign and domestic bribery, update, and trends along with many more.

COVID-19 measures in Dubai and Abu Dhabi

New measures to curb the “second wave” of COVID-19 cases have been introduced by the Dubai Supreme Committee of Crisis and Disaster Management (the Dubai Committee) and the Abu Dhabi Emergency Crisis and Disasters Committee for COVID-19 Pandemic (the Abu Dhabi Committee).

 

On 1 February, the Dubai Committee announced that, effective the following day and for the duration of the month of February, all pubs and bars in Dubai must close, while restaurants and cafes must close by 1:00 am. Shopping malls, hotels, private beaches in hotels and swimming pools may operate at 70% capacity. Theatres, other indoor venues and sports venues must operate at a maximum capacity of 50%. Entertainment activities in restaurants and cafes are no longer permitted.

 

The Dubai Committee has urged the public to report violations by calling the Dubai Police or by using the Dubai Police App. There have been reports of recent prosecutions for violations, including the imposition of fines.

 

On 7 February, the Abu Dhabi Committee announced that, effective the same day and until further notice, parties and gatherings are prohibited and theatres shall be closed. No more than 10 persons may attend a marriage ceremony or a family gathering, and no more than 20 may attend a funeral or mourning service.

 

Malls are limited to 40% capacity, and gyms, private beaches and swimming pools are limited to 50% capacity. Restaurants, coffee shops, hotels, public beaches and parks may operate at 60% capacity. Taxis and buses may operate at 45% and 75% capacity, respectively.

 

The Abu Dhabi Committee also announced new rules on entry into the Emirate of Abu Dhabi, effective 1 February. Any individual entering Abu Dhabi from another Emirate must enter Abu Dhabi within 24 hours of taking the DPI (Diffractive Phase Interferometry) test instead of 48 hours. The same DPI test result cannot be used for two consecutive entries into Abu Dhabi. Those who entered Abu Dhabi on the basis of a DPI test and who plan to continue their stay for more than 48 hours must take a PCR test on 3rd day following entry and another PCR test on the 7th day.

 

The validity of the PCR test result to enter Abu Dhabi continues to be 48 hours; however, another PCR test must be performed on the 4th day and on the 8th day following entry. The day of entry into Abu Dhabi is considered as day 1. These requirements are not applicable to volunteers in clinical trials or to persons who have been vaccinated.

 

Moreover, all employers in Abu Dhabi have been directed to require their personnel who have not been vaccinated to undergo a PCR test at least once a week.

 

In addition, Abu Dhabi has updated the “green list” of countries for travelers arriving by air. The new “green list” as of 7 February 2021 is:

 

• Australia

• Bhutan

• Brunei

• China

• Greenland

• Hong Kong

• Iceland

• Mauritius

• Mongolia

• New Zealand

• Saudi Arabia

• Singapore

 

Individuals travelling from these countries are not required to quarantine upon arrival; however, they must perform a PCR test on arrival and repeat another PCR test on day 6 following arrival. Persons arriving from other countries as must quarantine for 10 days following arrival and must also take a PCR test on arrival and again on day 8 following arrival.

 

Finally, Ministerial Resolution 21 of 2021, promulgated by the Federal Minister of Health and Prevention and effective 7 February 2021, provides that PCR tests will be given free of cost at all Ministry centers. The provision applies to all UAE nationals and all persons holding UAE visas. ■

 

 

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Please note that new rules and developments are occurring in the UAE on a very frequent basis. These are subject to change without prior notice or formal/public announcement. 

 

 

Acquisition of UAE Nationality

The Government of the UAE made another milestone announcement on 30 January 2021, announcing a procedure for the granting of citizenship to foreign nationals in a bid to retain talent in critical sectors and to expand and diversify the economy.

 

Nationality and citizenship in the UAE are governed by Federal Law No. 17 of 1972 Concerning Nationality and Passports, as amended by Federal Law No. 10 of 1975 and Federal Decree-Law No. 16 of 2017 (the Nationality Law), pursuant to which UAE nationality may be obtained by law, citizenship or naturalisation.

 

The recent announcement, as reported, would amend the Nationality Law to make the following categories of individuals eligible for UAE nationality by naturalisation:

 

• Leading artists and intellectuals;

 

• Authors;

 

• Doctors and specialists in unique scientific fields with significant contributions and experience of at least 10 years;

 

• Engineers;

 

• Investors who own property in the UAE;

 

• Inventors who have been granted at least one patent approved by the UAE Ministry of Economy;

 

• Scientists with at least 10 years of experience who are active researchers and have made substantial progress in science as recognised by prestigious scientific awards or funding; and

 

• Members of the immediate family (i.e., spouse and children) of a person who is naturalised under one of the foregoing provisions.

 

The process of naturalisation would begin with a nomination by the Federal Cabinet or by the Ruler’s Office or Executive Council in an Emirate. Letters of recommendation are also required for nominations in most categories. The detailed criteria for each category have yet to be announced. Reports indicate that a person who acquires nationality under the new rules will not be required to renounce his or her earlier citizenship, but instead may remain a dual national; this is a departure from the previous rules for acquiring nationality under the Nationality Law.

 

This is the latest in a series of recent measures that aim to attract and retain talent. Others include the introduction of the “golden visa,” the “retirement visa,” and the “remote working visa.” Another new visa category is the “student family visa,” whereby a foreign student in the UAE may obtain a residence visa while also sponsoring residence visas for family members. ■

 

UAE Majority Shareholder No Longer Required

In what appears to be a seismic move, His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, has passed a decree allowing foreign investors to own 100 per cent of UAE companies based on the mainland (i.e. outside of the free zones). This change is expected to come into effect as early as December 2020.

 

This is a remarkable change, removing the requirement to have a majority Emirati shareholder (i.e. at least 51 per cent). Certain sectors such as oil and gas, transport and utilities and strategic areas are exempt.

 

The UAE Commercial Companies Law is set to be amended to allow for such changes.

 

The transformation will certainly enhance the UAE’s position in the global market. The doors are open to foreign investors.

 

We will provide more updates as the story develops. ■

The separability of an arbitration clause – the Sharjah Court of Appeal sets limits

The Sharjah Court of Appeal recently declined to apply the principle of separability of an arbitration clause, on the basis that the underlying agreement (i.e. in which the arbitration clause was contained) was not defective or argued to be invalid by the appellant. This judgment has potentially significant implications for parties who intend to rely on an agreement which contains an arbitration clause to assert claims in court.

 

The separability of an arbitration clause is the legal principle that allows an agreement to arbitrate to be considered independently from the contract in which the agreement to arbitrate is contained. The effect of this principle is that even if the underlying agreement is held to be invalid, the arbitration clause in the agreement will remain valid (unless the agreement to arbitrate itself is found to be invalid for reasons other than the invalidity of the underlying agreement). However, as specific authority is required to create a valid arbitration agreement under the laws of the UAE, it is common to see this principle being relied on to bring claims in court, on the basis that the arbitration clause is invalid for want of authority, but the rest of the agreement is sound and may be relied upon to assert claims.

 

The principle of separability is recognised in the UAE’s Federal Arbitration Law (Federal Law No 6 of 2018), and the recognition of this principle was considered one of the highlights of the law. Article 6(1) of the Federal Arbitration Law provides as follows:

 

An arbitration clause shall be treated as an agreement independent from the other terms of contract. The nullity, recission or termination of the contract shall not affect the arbitration clause if it is valid per se, unless the matter relates to an incapacity among the parties.

 

The dispute before the Sharjah Courts arose in relation to a commercial agreement between a foreign company (the plaintiff) and a UAE company based in Sharjah (the defendant). The plaintiff instituted proceedings before the Sharjah Court of First Instance asserting certain contractual claims based on the agreement. The defendant took the position that the Sharjah Court had no jurisdiction because the agreement contained an arbitration clause.

 

The plaintiff argued that the individual who signed the agreement on its behalf had no authority to agree to arbitration on its behalf. The plaintiff sought to advance this argument by reference to the standards applicable under UAE law to establish the authority to agree to arbitration (or in this case, the lack thereof). The defendant took the position that the issue of authority to agree to arbitration should be determined with reference to the law applicable to the plaintiff (i.e. the law applied in the plaintiff’s country of incorporation), and not UAE law.

 

Although the question of authority was the principal issue addressed in the parties’ pleadings, the Sharjah Court of First Instance issued judgment dismissing the plaintiff’s case for the want of jurisdiction. The court held that the plaintiff may not simultaneously rely on the agreement as the basis of its claims and seek to dispute the validity of the arbitration clause contained therein. The plaintiff thereafter filed an appeal to the Sharjah Court of Appeal, and its principal argument was based on the separability of an arbitration clause. The Court of Appeal held against the plaintiff/appellant on the basis that the plaintiff/appellant has taken the position that the agreement is binding in asserting its claims and, as the agreement itself was not defective or invalid, the arbitration clause cannot be separated from the rest of the agreement.

 

It therefore appears from this judgment that a party asserting a claim in court may not seek to rely on the separability of an arbitration clause if it does not also assert that the underlying agreement itself suffers from some form of invalidity. It is likely that this judgment will be appealed to the Union Supreme Court. Until such time the Union Supreme Court issues its judgment, this judgment will give pause to parties who intend to assert contractual claims in court on the basis that the arbitration clause in their agreement is defective. ■

 

Doing Business in Iran: Joseph R. Biden; New Path Forward

The landscape for doing business in Iran may have changed significantly with the election of Joseph R. Biden as President of the United States.

 

On July 14, 2015, the P5+1 (the United States, the United Kingdom, Germany, France, China and Russia), the European Union and Iran agreed and signed a Joint Comprehensive Plan of Action (“JCPOA”) contemplating the easing of certain Iran related sanctions. On October 18, 2015, Adoption Day, the JCPOA came into effect and signatories began embarking on the steps necessary for implementation of the JCPOA. On January 16, 2016, and after the International Atomic Energy Agency’s verification of Iran’s commitments under the JCPOA, the United Nations, the European Union and the United States ceased the application of sanctions relating to certain sectors of business activity with respect to Iran (i.e. no longer restricting non-US persons from engaging in certain activities) and doing business with Iran began again.

 

It is important to note that the US sanctions on Iran restricting US persons from dealings related to Iran (“US Primary Sanctions”) always continued in full force and were not affected by the JCPOA (as opposed to the U.S. sanctions regime concerning non-US persons’ dealings related to Iran (“US Secondary Sanctions”); it was these US Secondary Sanctions that ceased to apply as of January 16, 2016.

 

However, in 2018 the French, German and British governments had been in talks with the United States with respect to its concerns regarding the JCPOA for many months. Even though the United States had agreed to the deal in 2015, the US expressed serious concerns about certain aspects of the deal and decided to withdraw from the Iran nuclear deal (i.e. JCPOA).

 

The US government, in light of its withdrawal, reimposed certain US Secondary Sanctions with respect to Iran on August 6, 2018, with any remaining US Secondary Sanctions reimposed by November 4, 2018.

 

New Path Forward

 

However, with the election of Mr. Biden as President, there may be a new path forward with respect to Iran. Indeed Mr. Biden has stated that the US would rejoin the JCPOA if Iran returns to strict compliance with the JCPOA. If this occurs, it would usher in a new chapter in the economic and geopolitical landscape of the Middle East as well as renewed investment and business opportunities (and challenges). ■

Does VAT apply to bare land that is leased to a tenant who will develop it?

The supply of undeveloped (bare) land is exempt from value added tax (VAT) pursuant to Article 46 (3) of UAE Law No 8 of 2017.

 

Bare land (as opposed to covered land) is defined as ‘land that is not covered by completed, partially completed buildings or civil engineering works’ pursuant to Article 44 of Cabinet Decision 52 of 2017. Accordingly, the supply (in this case, a lease) of land that does not have completed or partially completed buildings or civil engineering works is exempt from VAT, and hence no VAT is payable.

 

Note that land means ‘any area on the surface of the earth which may include trees, plants or other natural objects in, under or on top of it’ (UAE Federal Tax Authority VAT Guide, Real Estate, VATGRE1, April 2020).

 

Land will not be considered to be bare land where it is covered by civil engineering works which are complete, or partially complete. Land will be considered to be bare land where there are civil engineering works which run underneath the land, but which do not break the ground surface of the land and to which land carries no right of access. Examples of civil engineering works include roads, bridges, and pipes used forming water or power services. Also, where land has been fenced to allow construction to commence and temporary movable structures were placed on the land then the fencing and movable structures will not change the classification of the land from bare land to covered land.

 

However, even if land that is leased to a tenant is bare to begin with, the classification of such land can change if the tenant develops the land. Accordingly, after the tenant commences construction such that the land has civil engineering works or a partially completed building, then the land is no longer bare land.

 

This subsequent change in nature of the land will not immediately affect the VAT treatment of the land, however if any further supply of the land is made by the landlord (for example entering into a new lease agreement, or if the supply is treated as being made periodically under Article 26 of VAT Decree Law No (8) of 2017), then this subsequent supply of the land would be subject to VAT at the standard rate as it would no longer be a supply of bare land. ■