Doing Business in the GCC

1 Doing Business in the GCC By Scott Appleton 14 ACC & Laurence Simons EMEA Legal Department Survey 2013 Identifies In-house Trends By Maggy Baccinell...
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1 Doing Business in the GCC By Scott Appleton 14 ACC & Laurence Simons EMEA Legal Department Survey 2013 Identifies In-house Trends By Maggy Baccinelli 15 Survey Reveals In-house Views on Expanding Business to Africa By Charles Laurence 16 European Case Law Round-up By Carolyn Boyle 18 New ACC Value Challenge Guide: What’s Different in Europe? By E. Leigh Dance

a special supplement to ACC Docket

Doing Business in the GCC By Scott Appleton ([email protected]), 954 Consulting

A region of competing and contrasting opportunities

The business opportunities opening up to international companies in the Cooperation Council for the Arab States of the Gulf (GCC) are fast increasing, but the six countries it comprises have different commercial attractions and potentially competing economic goals, participants heard at a recent conference in London. Hosted by law firm Norton Rose, and drawing on the practical experience of panelists from Aegis Group, Boston Consulting Group, Celerant Consulting, Citigroup and Everything Everywhere, the advice offered to ACC members was both insightful and practical. In seeking to do business in the region, international companies must undertake the requisite due diligence to confirm the depth of demand for their offering and to understand the right markets to enter. Due diligence should also ensure that companies choose the right local partner, under-

stand the relative regional legal and political differences, and have in place mechanisms to unwind any local operations should the need arise. Getting into the GCC may actually be easier than leaving, cautioned some experts.

The drive for diversification

The GCC has enjoyed an oil- and gas-fueled boom lasting over half a century, with the past two decades particularly demonstrating the dynamism (and drive for diversification) of the leading regional economies. The dramatically changing skylines of Abu Dhabi, Doha and Dubai are the most obvious reflections of the scale of regional investments. Established in 1981, the GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE), a federation of seven autonomous Emirates, with the most high-profile being Dubai and the capital, Abu Dhabi. The combined population of the GCC is around 50

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Doing Business in the GCC

million (with most people under 30), but two other countries, Jordan and Morocco, have now been invited to join with a goal of membership by 2015. Oil and gas remain the regional economic drivers, and it is petrodollars that underwrite major government projects and spending, with the public sector still the major regional employer. But across the GCC, finite resources mean that there is a strong drive towards economic diversification, and it is this that is pulling in more foreign businesses, in the construction, finance, manufacturing, telecoms and services sectors, said participants. Despite the evident current natural resources wealth, the region is not immune to social or economic tensions, said Jane Kinninmont, 2

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senior research fellow on the Middle East and North Africa (MENA) program at Chatham House in London (see Digital Docket exclusive content, “A Region in Flux”), including rising social security and public spending costs, and issues around the centralisation of political power. Greater integration is bringing populations together but governments remain varied, from monarchies to new democracies. “What must first be appreciated is that the GCC is not an amorphous mass; there are clear cultural as well as legal and business differences between individual states that must be understood, or at least appreciated, if your business is looking to establish an on-the-ground operation,” emphasized Darryl Coulter, solicitor and group legal manager at

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Celerant Consulting, which operates out of both Abu Dhabi and Oman. After five years developing Celerant’s business in the region, Coulter now has a better appreciation of the economic rivalries and cultural nuances that exist between countries. Notable, he says, is the decision of many in the company to live in Dubai but to work in nearby Oman. Nonetheless, such a lifestyle choice is changing as the government begins to insist that those who work in Oman also live there. A presence on the ground has proved crucial in benefiting from the economic changes so evident in the region, says Coulter. “There are challenges in building a credible local operation, but we decided that if we wanted to be there for the long term and meet the needs of local clients, then a formal presence would show we were serious — this has proved to be the best way to build stable relationships. What we have found is that to do things properly takes time.”

Cultural awareness

It is the day-to-day cultural issues that inevitably raise most questions and are sometimes misconceived, say lawyers with experience in the region. To operate within the GCC, businesses inevitably have to adapt, but executives also have to be culturally aware. Outside of Saudi Arabia, there are few practical issues presented to nonlocals (including women) in terms of living or working in the GCC, emphasised Kim Hilton, Head of Regulatory Law at Everything Everywhere, but who previously practiced with an Australian law firm in Bahrain for three years before moving in-house at Abu Dhabi-based telecoms group Etisalat. “When I moved to Etisalat, I was the first female employee and I have to say my boss made a real effort. I was made to feel very welcome. But even before that, as a practicing lawyer, I often felt that as an outsider I was able to bring a new dimension to negotiations, to make progress where the local lawyers were unable.”

There are social conventions that apply specifically to women and must be followed, but Saudi Arabia aside, across the GCC women can mostly dress as if they were going to work in London, adds Farmida Bi, banking partner with Norton Rose. “There are behavioral differences, and as a woman you would never shake hands; but having worked in the region for almost 15 years, I would never put anyone off working there.” Such differences should not be regarded as a barrier to companies expanding their operations in the GCC, or for lawyers looking to broaden their horizons, the panelists insisted. You have to adapt but not worry. Aspects of doing business in the region are also different from those in Europe or the United States, notes Tim Odell, deputy general counsel at Citigroup. “Negotiations tend to take longer, and people don’t tend to shout. But there are also perhaps differences in the way business is conducted with Anglo Saxons and non-Anglo Saxons.” In terms of recruitment, differences in expectation also come to light. Among the region’s highly educated youth, there can be a contrast between what people expect work in an international company to entail and the reality, Odell says. “Foreign companies want local employees, they need them, but predominantly to work in their local offices, which means the opportunity for international assignments is inevitably more limited than may be the perception of recruits.”

Finding the right local partners

Having the right local connections is vital for a foreign business looking to establish operations in the GCC and to ensure long-term success, but new arrivals must appreciate that politics and business are often intricately linked. To operate locally (beyond the few dedicated International Finance Centers, or IFCs), companies will need to find a local partner or sponsor, which can bring its own issues, emphasised the panellists. The local partner will likely need a special supplement of ACC Docket 3

Doing Business in the GCC

to hold 51 percent control of any joint venture, but in reality may want little to do with the day-to-day affairs of the business. “The ideal from a company perspective is to have 100 percent ownership of the local operation, which gives you day-to-day control. But the reality in most cases is that you have to find and work with a local sponsor. It can be a very real challenge to work with local affiliates in some countries,” says Simon Zinger, group general counsel of media and communicationsfocused Aegis Group, which has operated across the GCC for almost nine years. An understanding of local legal and business nuances is vital therefore to securing the right business structure, which may also determine the most practical regional base, say some. “In Oman, our local partner holds 30 percent of the business, but we have removed any voting rights. This structure would however be illegal in Qatar, where 51 percent The best guarantee of local ownership means having real control and which avoiding a dispute and is enforced,” says Coulter at enforcing an agreement Celerant. is to operate in good faith, Finding the right local emphasised the panelists. partner must be a key part of your due diligence, say lawyers, as they often act, in effect, like local power brokers; individuals may have ties with the local political establishment but lack the right business expertise for your industry, or already may have well-established ties with your competitors. “Two sponsors were suggested to us and we were told that if we wanted to set up operations locally we would have to do business with one or both of them. What you must consider is that a local partner, your local partner, may have ties with other business sectors and even your competitors, and they may also not be exactly CEO material,” adds Zinger.

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Legal comfort

In terms of ensuring legal comfort, it can help to frame the nature of the relationship with a local partner in a formal engagement letter, some suggest. It can also be useful to add supporting documentation setting out each side’s obligations and expectations, including what may happen in the event of a fallingout. Individuals within an organization may come and go, but the right legal documentation will sustain you. “In our case, we drew up a relatively simple two-page sponsor agreement but behind it stood an Anglo Saxon-style model joint venture document with the necessary protections. I’m not entirely sure it is 100 percent enforceable, but it gives us the comfort we require to mitigate the risks of doing business with one family in a country in which we were not altogether familiar,” says Zinger. It is always possible to negotiate terms but background protections can have practical advantages, agreed others. “You always have to balance the legal position with the business reality and to consider that a falling-out with your sponsor may limit your ability to do business in that country,” said Coulter. In order to operate locally, a foreign business will have to pass over significant powers to the local affiliate; it can also be useful to put in place mechanisms to reach beyond them to local stakeholders and banks, in the event that you do need to continue to do business without them. “You have to take the position that you are always a guest in whatever country it is you operate, and therefore any falling-out may present longer-term challenges and problems,” he added. As well as facing challenges presented when entering the GCC, companies can also face issues when they want to disengage from the region, noted Anthony Kenny, European counsel of The Boston Consulting Group.

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“Most countries in the GCC are happy to see common-law–based transactions, but you have to expect the issues to be interpreted in the local context, in Sharia court and under Sharia principles. And this extends to finishing agreement,” Kenny says. “To terminate a contract in Qatar, for example, you have to apply for permission through the courts.”

Avoiding disputes

Almost unanimously, the panelists advised trying to avoid becoming embroiled in a formal dispute in a local court within the GCC. Islamic law prevails, and outside of the Dubai or Qatar International Finance Centers (where special rules apply), it will take precedence in the determination of issues arising out of commercial disputes (including foreign contracts), predicting the outcome of which can present a challenge to even the most experienced GCC lawyers (see Digital Docket exclusive content, “Managing Disputes within the GCC”). In negotiating contracts with local suppliers, affiliates and sponsors, a shadow contract can prove useful to help avoid issues being determined under Islamic (Sharia) law, especially if it include the possibility to enforce any claim on assets held outside of the region. Local parties may not be happy contracting under U.S. or English law but may readily accept a neutral foreign law (with Switzerland increasingly chosen). The best guarantee of avoiding a dispute and enforcing an agreement is to operate in good faith, emphasised the panelists. In some recent insolvencies of major regional companies, it has been interesting to note that local creditors have been favored more than others, and people are more concerned about the potential domestic fallout than their international obligations. “The way business is done and negotiations conducted, and the relative size of the GCC business community, combine to mean that preserving the ‘good’ name of an individual party is often a key goal, whatever the issue presented,” says Odell at Citigroup.

Long-term prospects

Despite the legal and operational challenges that surround establishing an operation within the GCC, and despite some of the new economic pressures emerging after the Arab Spring, an economic union of 50 million people presents growing attractions for international investors. Saudi Arabia alone has a vision of building and connecting seven new cities in the coming decades and the drive for diversification to decrease reliance on oil and gas is a goal across the region. “There is a tension between the current rates of regional public expenditure and that which will be required in the future. But in terms of infrastructure, the region as a whole is still under-developed,” explained Kinninmont. “The scale of some of the development proposed is incredible, but there is almost no alternative but to continue to invest to achieve greater economic diversification. In some states, greater emphasis is already being placed on attracting more private sector funding.” It is a region of tremendous development: Iraq may have been the cradle of modern civilization, but it is Doha in Qatar that is arguably the first 21st-century city, concludes Coulter. “From a western perspective, operating and living in the GCC can produce a culture shock, but I challenge anyone not to be amazed by what is happening there. From a business perspective, you cannot help but see yourself as guest in the host country. But to build a sustainable operation means committing to the GCC, and like the region, investing for the long-term.” EMEA Read the rest of this article online at www.acc.com/docket.

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Doing Business in the GCC: A Closer Look A Region in Flux Jane Kinninmont,([email protected]), MENA Programme, Chatham House

The GCC may at first glance seem an oasis of relative calm in a wider region undergoing significant change, but stresses do exist. The Arab Spring is raising new social and economic tensions, while externally its member states are looking ever further east for new market opportunities. Currently, the main social and economic challenges facing the GCC are threefold: • Domestic politics • International context • Economic trends Domestic politics

The GCC may comprise six distinct countries, but across the region the majority of the population is young, under 30, and they have a very different outlook (and expectations) compared to their parents’ generation, including in terms of media freedom and consumption. Measured in terms of the use of social media, for example, the GCC is among the fastest-growing for social media such as Twitter. But the same dynamics are also prompting significant social and economic changes. The public sector is still the major domestic regional employer, but there is relatively high unemployment among youth, who tend to be well-educated but with limited career opportunities: Most top jobs within international companies still tend to be occupied by expatriates. And in any event, it is often not feasible for international companies to match local public sector pay rates, which have a political dimension. Following the Arab Spring, Qatar, for example, increased public sector wages between 60 and 100 percent. There is a question therefore of how regional governments can balance the earning and consumer expectations of their (young)

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populations with the fiscal reality: Oil and gas revenues are not increasing at the same level. Such dynamics are prompting different responses across the GCC, but the major current debate centers around access to decisionmaking power, historically the preserve of the ruling Emirs. The different responses adopted have thus served to highlight some of the tensions that continue to exist between States and regional groups, where dynastic rulers are not necessarily reflective of the majority population. Greater GCC integration is therefore speeding up the pace of change as local populations see more in common with each other, and as absolute monarchies rub shoulders with nascent democracies. But in other respects, the Arab Spring has seen the incumbent GCC governments form closer bonds, including regarding security integration. Collectively, the member states may have taken a supportive stance with Syria’s opposition against the ruling Assad regime, but within the GCC there has been a closing of ranks. Each of the six governments stood as one against the popular protests that arose in Bahrain, against the growing threat posed by Iran and the political rise regionally of the Muslim Brotherhood. International context

On the global level, there is now an evident shift east in terms of where the GCC sees growing demand for its oil and gas. Asia is the subject of increasing economic and political focus, especially as countries like the United States seek greater domestic energy security. Significant in this regard was the decision of the Saudi King, Abdullah, to visit the region on his first foreign state visit after taking power in 2005.

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Nonetheless, the pro-Assad stance of China and Russia in respect of the ongoing situation in Syria has clearly had an impact on regional relations to some degree. And despite reduced economic dependence, relations with the United States and Europe remain strong despite occasional tensions, including a perceived lack of reliability among some western governments. The United States, for example, cannot help but be involved in regional politics to a certain extent because of its support for Israel. In some respects, the GCC is now emerging as a regional economic superpower, using its financial resources to take on more of a leadership role, as well as from a military perspective, in looking to develop a common approach to countering any threat posed, for example, by Iran. The offer of development aid to countries such as post-revolution Egypt is notably seen as a useful political tool in the face of the rise of the Muslim Brotherhood.

current levels. The government will simply be unable to match current wage and social security levels and undertake the planned infrastructure and other developments scheduled. The rate of public spending in Saudi Arabia has seen the basic rate it must attain for each barrel of oil rise from US$25 to around US$85

Economic trends

Oil, and to a lesser extent gas, remain the major regional economic drivers and underwrite virtually all major government projects. However, this is increasingly less true for places like Abu Dhabi and Dubai, which are further along the road in terms of economic diversification and where more private finance is being utilized. The Arab Spring has catalyzed some significant short-term changes, specifically increases in public sector salaries and pensions and in security jobs. But such developments have the potential to undo some long-term goals. Saudi Arabia last year saw economic growth of 6.8 percent, the highest level in years, matched by lower inflation. But the next decade will present budgetary challenges if domestic public spending continues to match



in recent years. Something has to give. And this comes as economic competition increases between states. Qatar has the highest spending power per individual, being the wealthiest country per capita, while the UAE is seeking a more prominent regional leadership role. Notable was the decision of the UAE to walk away from talks to create a common GCC currency after the decision was taken to locate the Central Bank in Riyadh rather than Abu Dhabi. But the overriding challenge collectively facing the GCC is fiscal sustainability. The perceived need for greater social appeasement through higher public sector wages has, in the long term, the potential to derail the region’s plans for greater inward investment and economic diversification. EMEA

a special supplement of ACC Docket 7

Doing Business in the GCC: A Closer Look The Importance of Knowing Your Client Tim Odell ([email protected]), Citigroup

An ever-increasing element of the legal department’s work in the GCC is to comply with international know your client (KYC) rules, and for many more UK/US businesses anti-corruption and bribery concerns are now a major reality. Within the GCC a particular issue is not being able to deal with Iran or even companies that deal with Iran because of US and European sanctions. KYC rules used to be perceived as a “US bank” problem, but are an increasingly a global corporate concern. The strength of antibribery sanctions mean that an ill-judged transaction in the GCC may lead to people in New York going to prison, so the requisite due diligence is a major aspect of every deal we do. In this context it is often a question of trying to unpick what may be local rivalries and inferred dealings. But the need for which has created a mini explosion within the banks, huge costs being incurred and entire new teams being created to manage issues. We are now seeing mirrored in Europe the huge fines imposed by the US authorities for infringements, as well as the need to build a strong dialogue with governments to properly understand what may be emerging concerns. It increasingly means having to take on more of a lobbying role. This is a necessary involvement, as a failure to comply can be very costly and very public. And if an issue is uncovered we often have to engage outside risk analysis, resulting in additional transaction costs, especially as blacklist names and companies are continually changing. Therefore we demand reps and warranties that any money lent is not going to be used in contravention to KYC rules, which is inevitably very difficult to enforce. Under analysis it often comes down to a question of quantum: Is the amount lent a minor or major part of what ultimately happens? A feature of doing business in the GCC also often means having to unpick transaction terms, and it is not uncommon especially when dealing with regional state entities to see clauses specifically ensuring that no element of the deal involves Israel. Obviously we cannot endorse such demands, and under US law it is in any event illegal to enter into “boycott Israel” provisions. Ultimately, we have all become policemen. EMEA

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Doing Business in the GCC



a special supplement of ACC Docket 9

Doing Business in the GCC: A Closer Look Managing Disputes within the GCC By Scott Appleton ([email protected]), 954 Consulting Featuring Michael Godden ([email protected]) and Dominic Hennessy ([email protected]), Norton Rose

An issue that has the potential to challenge even the most experienced western lawyer is finding your company embroiled in a dispute within one of the GCC member states. Each of the six countries has different and distinct cultures and legal traditions, but all follow Islamic traditions and, except for Saudi Arabia, have an evident Napoleonic legal influence on their legal systems, making them more like civil law than common law. The same but different

When seeking to understand how local courts work, it can be useful to compare systems, says Michael Godden, a disputes partner with Norton Rose: “Saudi Arabia has by far the most traditional legal system in the region, and Sharia Law dominates every aspect of commercial and social life, meaning that it is not possible to look at the jurisdiction coherently through Anglo Saxon eyes.” Within the Saudi courts, there is also no real concept of precedent, so it can be difficult to predict judicial decision-making, and the legal texts are written and interpreted by jurists, Godden explains. Specific decrees do regulate major commercial activities, but there may often be a gap between the strict interpretation of legal texts and the commercial realities of the 21st century, so concepts have to be extrapolated. Almost in direct contrast is the way legal and business issues are managed in the International Finance Centers (IFCs) of, for example, Dubai and Qatar. Local legal norms are disapplied and in their place exists an English law–influenced judicial and regulatory envi-

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ronment, intended to encourage more foreign inbound business. Parties may agree to settle disputes using foreign law concepts. “In the Dubai IFC, where the system is common law–influenced, there is greater legal certainty and English law precedents can be cited. The civil procedure rules are modelled on the English High Court and there is an absence of the regular adjournments that can be a frustrating feature of local court procedure, meaning decisions can also be reached significantly quicker,” says Dominic Hennessy, a senior associate with Norton Rose who recently spent four years in the firm’s Dubai office. In the Dubai IFC, English-language documentation and witnesses can also be utilized, which again contrasts strongly with the region’s local court systems where Arabic prevails (and where English and Arabic are not natural translation bedfellows). Jurisdictional exclusivity

A further feature of disputes within the GCC is that Islamic law will inevitably be applied whatever the legal or contractual context, unless they are heard within an IFC. “Traditionally, to be heard by the Dubai IFC court, a matter had to have a connection to it, but since 2009 there has been an ‘opt-in’ option for civil and commercial disputes to be heard there,” explains Hennessy. Such a decision may also avoid issues around enforcement, as previously only rulings made in the national Dubai courts could be enforced locally. “The ability to enforce a Dubai IFC is now enshrined not only with the Emirate but across the UAE, and arguably there is more chance of enforcing a Dubai ruling elsewhere across the GCC than one from, say, the English courts,” he adds. In terms of expertise, the choice of an IFC court can also pay off, adds Godden. Litigators across the GCC tend to be generalists, as do the

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judges. In Dubai, not only do the parties have a choice of language and law but they can also utilize foreign counsel. “English-language disputes naturally gravitate towards the Dubai IFC. It is not by any means a cheap option, but court fees tend to be minimal in contrast to the norm regionally, where both the local lawyers and the courts will charge fees relative to the value of the matter in dispute,” Godden says. But this is not to say dedicated expertise does not exist in local GCC courts, with dedicated commercial tribunals as well as banking and insurance committees (which also hold regulatory powers) established in Saudi Arabia. “These tribunals tend to sit in private, so it can be difficult to find relevant precedents; the Committees can make only recommendations, not binding orders,” says Godden. Inevitably, any dispute requires local counsel in order to best understand the parties’ relative position. And as most courts operate through a system of written pleadings, it is simply impossible to approach local litigation with British or American expectations, he insists. “It is worth noting also, that at least in Saudi Arabia, there is no defined separation of powers and political influence is a fact of life. Similarly, even with judgment, there is no clear enforcement mechanism; debtors can be arrested; and there is a new enforcement law, but again there is often a degree of discretion as to how it is enforced.” Arbitration as a panacea?

A potential alternative to pursuing a claim through the local GCC courts is arbitration, as all the GCC member states are signatories to the most relevant international Conventions. But the reality is not so straight-forward, cautions Hennessy. “The Conventions have been agreed, but in reality a number of states have yet to pass



the necessary implementation legislation. In Saudi Arabia, some judgments of the Court of Grievances (the local enforcement court) have even found arbitration to be ‘contrary to public policy’.” A jurisdiction-by-jurisdiction approach must therefore be taken to any dispute, they say. The Dubai IFC operates a joint venture with the London Court of International Arbitration (LCIA), while Bahrain has enacted dedicated arbitration laws, as both look to position themselves as regional arbitration centers whose rulings are more likely to be honored. “There is little chance that a local court will enforce a non-local judgement, particularly in Saudi Arabia, and it is questionable whether they would enforce an arbitration award from London or New York. Local arbitration is likely the best option and would in any event offer a more predictable and familiar process than going through the local courts,” says Hennessy. If a foreign company finds itself drawn into a dispute, not only does the legal team need to take local law issues into account. GCC courts will likely apply Islamic law principles even to foreign law agreements, but there is also the likelihood of enforcement to consider. In addition, a party must also give some consideration to whom they may be in dispute with, the experts note. The downturn may have made parties more willing to consider formal dispute resolution mechanism, but the threat of a “loss of face” may still help bring people back to the negotiating table. EMEA

a special supplement of ACC Docket 11

Doing Business in the GCC: A Closer Look Quick Counsel: Doing Business in the GCC By Alan Bainbridge ([email protected]), Norton Rose

When it comes to doing business and conducting negotiations with parties in the GCC, there are a number of guiding principles and approaches common to the region. 1. Take the lead: The in-house counsel is perceived as having the lead role in negotiations, so expect any external counsel to take on a “shadow” role. Parties often feel they can be more open with the principal and will look to negotiate directly. 2. Contracting under local law: Local companies expect to operate under local law rules, so expect this, and that a firm stance to the contrary may damage a nascent relationship. The choice of law is however often a last negotiating point and, if you have a choice, use the default as your own local law. Alternatively, a growing neutral choice is Swiss law because of the sophistication of the legal system, courts and lawyers, and because the “good faith” principle is dominant in Swiss law. 3. Competitive advantage: While there is no competition law across the GCC, there is rivalry between legal regimes to create the most investment-friendly frameworks. Many people prefer to live in Abu Dhabi but work in neighboring Dubai or Oman. This competition is linked to the rise of distinct financial centers, with four currently dominating: Abu Dhabi, Doha, Dubai and Riyadh. Arguably, this is three too many, but it does help to demonstrate that member states are looking to gain competitive advantage and this includes legal influences, cherry-picking the best regulatory regimes. In this respect, the 2006 U.K. Companies Act, for example, is a major local influence.

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4. Employment requirements and local content: Employment issues are often a major stumbling block for foreign companies operating in the region, even those with joint ventures, as they will still need to ensure they have the right people on the ground. Local content rules differ by state but the more technical and leadership roles are typically undertaken by expatriates. Even so, they must still adhere to local holiday requirements and may draw on local rules around redundancy and severance (End of Service) payments, regardless of the terms of their “home” contract. In employment contracts, it is common to have one local and one foreign contract, but in a domestic court the local contract will take precedent. Local contracts do not therefore need to be job-specific. 5. Technology transfer: This is a major driver for many public and local entities forming associations with foreign entities. There may therefore be a strong emphasis given to ensuring that any IP rights are channeled through a joint venture vehicle. The question inevitably is: Where do the IP rights lie if the relationship turns sour, as often the local partner will have the majority ownership share? In essence, this comes down to planning, to ensure that any licenses, for example, are terminated immediately once one party exits the joint venture, or through the imposition of penalty costs. In most states, it is not possible to buy out the partner or claw back ownership. 6. Joint ventures and compensation. There are very few self-help remedies for specific performance under local GCC law. Often in the

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case of a dispute, enforcement or payment comes down to arrests and seizures, with the assets sold through public auction and the proceeds raised passed to the claimant. It is possible therefore to get the cash value of assets but not control of them. In addition, while privity of contract is recognized, the principal will retain liability unless it can exempt itself through the use good local protections. 7. Regional exposure without a joint venture: Many foreign companies may see the GCC as an attractive region but are not yet convinced of the need to operate there directly. This is currently only really possible by



operating through one of the regional International Financial Centers (IFCs); offering local exposure without the need to comply with local content, ownership or emiratization requirements. Should a company take a step into the “local” market, when assessing a local partner it is wise to give more than passing consideration to anti-corruption and bribery issues. In regulated sectors, such as banking and insurance, it is not unusual for an individual with a valid license to offer to sell his services to the highest bidder, for what may be minimal objective input into the business. EMEA

a special supplement of ACC Docket 13