Call for More Emirati Legal Specialists

Call for More Emirati Legal Specialists

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Call for More Emirati Legal Specialists in Domestic Market to Enhance Capabilities in Country’s Legal System

University of Dubai organises first LLM Annual Forum to promote direct communication between students and legal experts

The first LLM Annual Forum of the Faculty of Law, organised by the university in Dubai recently, called for more legal specialists in the domestic market, especially Emiratis with high academic qualifications capable of contributing to the development of the legal system in line with international best standards.

The event was attended by Dr. Eesa M. Bastaki, President of University of Dubai ; Dr. Harold Koster, Dean of UD College of Law; H.E. Shamlan Al Sawalehi, Judge at DIFC Court; and Hikmat Beaini, UD Communications Manager, who moderated the forum, apart from a number of legal experts, lawyers and law students of the Masters programme at the university.

Speaking on the occasion, Dr. Bastaki said the first Annual Forum of the Faculty of Law is part of a series of events in the legal field, organised by the University of Dubai to strengthen direct interaction between students and faculty on the one hand and between judges, lawyers and legal experts in the country on the other. Such events would enable the students to gain practical information in the field of law rather than just academic perspective, he pointed out.

Dr. Bastaki said apart from the annual forum, the university organises specialised lectures and training programs for lawyers and judges. Stating that the Faculty of Law at the University has been witnessing a large turnout of Emirati students, Dr. Bastaki said the university is cooperating in this regard with key entities in the field such as the Dubai International Financial Centre Courts, and the Financial Audit Department of the Government of Dubai and others.

On the occasion, Dr. Harold Koster said the academic specialisation in law is critical in view of its importance in every sphere of economic and social activity. With a specialisation in law, students will be able to enter advanced levels in their careers and contribute to expanding relationships with other major sectors. He said the annual forum of the Faculty of Law will provide an opportunity for students to communicate directly with legal experts and benefit from their experiences.

HE Justice Shamlan Al Sawalehi described his experiences in the field of law, stating that the UAE labour market needs specialists with high-quality education in the legal field. HE Sawalehi commended the University of Dubai for its efforts in this area, especially through its Master’s programme, to achieve the UAE Vision 2021 which aims to provide high quality education in all fields to achieve sustainable development.

He said the LLM programme at the University of Dubai has helped the students to enhance their experience and enabled them to enter unique career opportunities. HE Justice Sawalehi encouraged more students to join the programme considering its contribution towards encouraging effective communications with major sectors.

Arab States in Support of Mobile Broadband

Arab States in Support of Mobile Broadband

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GSMA Urges Arab States to Maintain Flexibility in Support of Mobile Broadband Growth

Limited Spectrum Made Available for Mobile by Arab Spectrum Management Group Ahead of WRC-15

John Giusti, Deputy Chief Regulatory Officer, GSMA, commented on the outcome of the final meeting of the Arab Spectrum Management Group (ASMG) in Rabat, Morocco in preparation for this November’s World Radiocommunication Conference (WRC-15):

“The GSMA welcomes the overall outcome of the ASMG meeting to identify new spectrum for mobile in a number of bands. However, we are concerned that not enough new spectrum will be available to give national regulatory authorities the flexibility they need to fully meet long-term mobile data demand.

“Mobile has already made significant progress in closing the digital divide and bringing both communications services and internet access to previously underserved populations across the Arab States, particularly given the lack of fixed line infrastructure in most countries. However, despite the progress to date, there are several markets where less than 20 per cent of the population has internet access1. Securing additional spectrum for mobile at the WRC-15 conference will be crucial to support future mobile broadband growth across the Arab States, as well as enable the mobile industry to help meet governments’ ambitions to develop smart cities, driverless cars and connected energy management in the region.

“The GSMA is pleased with the ASMG’s decision to support a portion of the L-band (1452-1518MHz) for mobile broadband. This band has met with almost global support ahead of WRC-15, which will lead to significant cost benefits for consumers around the world through economies of scale.

“We further commend the ASMG’s support in making 3.4-3.6GHz available in the high capacity C-band for mobile use, giving Arab States citizens access to high-speed mobile broadband in dense urban areas. We will continue our discussions to increase the availability of harmonised spectrum in the 3.4-4.2GHz frequency range to further optimise the delivery of mobile services.

“However, we were disappointed with the ‘no change’ vote for the sub-700MHz UHF band (470-694MHz), which has characteristics suitable for expanding affordable mobile broadband connectivity to remote and underserved communities. Strong support from some Arab countries for a co-primary allocation for mobile and broadcast in the UHF band was underscored by findings of a GSMA study presented to the ASMG, which showed that terrestrial TV penetration has dropped below 20 per cent in the region and continues to fall2. We call on administrations to support a change in the radio regulations at WRC-15 that would give them flexibility to manage this important UHF spectrum resource efficiently and address local market demand.

“Looking ahead to this November, we hope that the WRC-15 process will create a framework that will enable the Arab administrations that want to move forward to secure the future of the mobile internet to do so. We urge all governments throughout the region to plan ahead now and ensure they have the flexibility to satisfy future mobile data demand, as well as achieve the substantial social and economic benefits that mobile broadband would deliver.”

Structuring Islamic Investments for VC Opportunities

Structuring Islamic Investments for VC Opportunities

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Structuring Islamic Investments for Venture Capital Opportunities

Amanjit K. Fagura, associate in the Dubai office of global law firm Morgan Lewis considers the opportunities for venture capital with Islamic finance structures in the UAE.

The increase in the number of young entrepreneurs and new start-ups being seen in the United Arab Emirates and the Middle East in general, offers the market an opportunity to utilise one of the seldom used Islamic financing structures, Mudaraba. The prevalence of what was once regarded as the back bone of Islamic finance, profit and loss sharing (‘PLS’) and which is the main concept underpinning the Mudaraba structure, has seen a consistent decline and almost depletion in spite of efforts of many Islamic scholars and institutions to realign the current trends in Islamic financing principles with a true participation by Islamic investors in the performance of the projects to which they seek economic exposure.

Mudaraba is one of the original forms of Islamic partnership finance which gave the most credence to the principles of PLS. However, the demise in its implementation is largely due to the more attractive alternative Islamic financing structures that are available and generally the prevalence of the conventional interest-based or bench-marked funding structures which we see today. Whilst the principles of Islamic partnership are guided by the need for equitable and just treatment their conventional counterparts are less concerned with such principles hence have seen an increase in their implementation. However, the need to nurture and facilitate the growth of new start-ups and venture capital opportunities in the UAE itself is something which can refocus the use of Islamic partnership and financing structures going forward and hopefully could be the starting point for the revival of structures such as Mudaraba.

Venture Capital Opportunities

The UAE Islamic finance market has seen significant growth and renewed interest from many corners of the world, particularly from conventional banks and investors looking to diversify their investment portfolios and delve into Islamic financing opportunities. Additionally, the rise in the number of young entrepreneurs and investment opportunities in the UAE and, in particular Dubai, is a positive indicator for the UAE economy and the businesses that are established there.

In particular, the UAE has recently advocated many initiatives and programmes to cultivate entrepreneurial growth and start-ups in the region including, but not limited to, the ‘Entrepreneurs Development Program’ (Tejar Dubai) and the ‘Mohammed bin Rashid Establishment for Young Business Leaders’ (Dubai government) as well as more established programmes such as the ‘Emirates Foundation’ who are based in Abu Dhabi and promotes projects to improve the welfare of youth across the UAE. Additionally, there have also been sporadic efforts by some professional investors to form ‘angel investor’ clubs to assist new talent in the market although this is yet to become commonplace.

Whilst the breadth of opportunities for new start-ups has increased, the venture capitalists in the UAE also have a duty to facilitate and translate these opportunities into reality. There are many ways this can be achieved but we will highlight a couple of the Islamic structures that can be used to do so and also how businesses, including law firms and service providers, can assist in this vision.

How to invest

Investments by private individuals and/or companies can take two main forms: passive investment or active investment. The former denotes an investor who contributes capital to a venture and receives a return on such investment but otherwise has little influence in the day-to-day management and decision-making of the venture ‘ this is particularly common where an entrepreneur has a business idea but little or no finances to implement the same hence needs to source funding from venture capital funds or wealthy individuals. The latter is a more ‘hands on’ investment with decision making and returns being shared amongst the parties (in varying degrees). The main structures that can be implemented to promote venture capital opportunities in an Islamic manner in the UAE are those of: (i) Wakala (agency); or (ii) Mudaraba (partnership), which are discussed in more detail below.

Main Islamic Structures

Wakala ‘ Agency

The principle of Wakala is an Islamic financing technique whereby an agent acts for and on behalf of the ‘principal’ for an agreed Wakala fee.

For venture capital investments, the Wakala structure can be utilised when venture capitalists wish to invest their monies in specific types of ventures and they appoint the entrepreneurs or new start-ups to act as their agent, in return for paying a fee for their services. Hence the venture capitalist can invest money with new start-ups whose vision and business ideas are in line with its investment parameters.

This can also be achieved through specific venture capital funds whose objectives are in line with the initial investors objectives. In such cases the objects of the venture capital fund will only permit them to invest in limited types of ventures. Ultimately, the fund will be acting on behalf of the investors as if such investors were the parties’ privy to the underlying legal documentation themselves. This Wakala structure can then be use by the fund to on-invest with new start-ups.

However, whilst the Wakala structure is often used in such funding structures, it leaves investors with no equitable interest in the underlying venture itself (even if they are entitled to performance fees) which is where Mudaraba financing structures could be seen as a more attractive alternative. 

Mudaraba ‘ A form of Partnership

Typically, in a Mudaraba partnership, an investor (a ‘Rab Al Mal’) provides the funding for an entrepreneur (a ‘Mudarib’) to create, manage and grow an investment where the Rab Al Mal has little or no right to participate in the day-to-day management of the investment/venture. This clear demarcation occasionally blurs where venture capitalists participate in certain strategic decisions of the venture but otherwise they often leave the Mudarib to proceed as they believe fit (subject to pre-agreed investment policies and guidelines) ‘ this also avoids the stifling of operations of the venture through micro management by the Rab Al Mal.

Ultimately, if the project or venture results in a profit this is shared in a pre-agreed ratio between the parties and if there is a loss the Rab Al Mal bears such loss solely. The Mudarib in such instance is considered to have lost the effort exerted by them in the venture and the opportunity to share a possible profit hence does not share any financial losses. Nonetheless, in some instances, if the loss was a direct result of the negligence of the Mudarib and the Mudarib had not taken the necessary degree of care expected of them in managing the investment they will then also be liable for the financial losses. In general, however, the concept in Mudaraba structures is less PLS and more profit-sharing-and-loss-bearing for the investor.

The Mudaraba structure can be applied in one of two main ways: directly between the ultimate investor/s and entrepreneur; or through an intermediary such as a fund who would act as the Rab Al Mal on behalf of the investor/s, thereby the intermediary would have full legal rights in the venture. Using such intermediary provides both the investors and the start-ups with higher prospects for success in the investment/venture as the intermediaries help facilitate and create opportunities for both parties by finding the right investment for the Rab Al Mal whilst getting the required funds for the Mudarib to bring their idea to fruition.

It should be noted that unlike other Islamic financing methods no security needs to be provided by the Mudarib to the Rab Al Mal, as the Rab Al Mal has a direct stake in the underlying investment. This could be seen as a very attractive model to new entrepreneurs as no collateral apart from the venture itself will need to be put forward ‘ this could ultimately assist to foster the growth of new start-ups and entrepreneurial talent in the UAE.

Conclusion

It is apparent that many new start-ups often suffer from poor advice, lack of funding and a general lack of knowledge of the market in which they operate, including the financial structures available to them and their ventures. In a relatively young market, it is imperative that the UAE try to manage such issues and cultivate growth of home talent in the correct manner at the outset. Hence the obligation to do so should go beyond government and national initiatives and should fall to and be promoted by those companies and businesses which are contributing to and seeking the prosperity of the economy in which they operate ‘ all businesses in the UAE.

To this end, many local and international law firms are spearheading pro bono initiatives to promote home-grown talent and entrepreneurs in the UAE. As an example, Morgan Lewis has recently established a legal clinic to assist regional start-ups, that do not have the means or resources to obtain professional help in incorporating their businesses, managing their legal affairs and raising capital. The aim is to promote local talent and also ensure the interests of the start-ups are better represented without investors taking undue advantage of the bargaining power they may have over entrepreneurs.

Nonetheless, the efforts of a few will not see a significant change in attitude and a more concerted effort needs to be made on a wider scale if Dubai and the UAE are to attract global investment and venture capital firms and to perform as a full scale global financial hub as the government has envisioned.

Franchise Agreements in the Middle East

Franchise Agreements in the Middle East

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Franchise agreements in the Middle East

Well known Western brands are perennially popular in the Middle East and the ability to introduce new brands to UAE consumers through franchising is generally perceived as a good businesses opportunity. Yet there are many elements of a franchising relationship which need to be carefully considered before concluding a franchise agreement, each of which if not properly considered can otherwise prove to be costly.

The UAE Commercial Agencies Law (Federal Law No 18 of 1981) and the Regulations promulgated thereunder is the principal legislation governing franchising agreements in the UAE. The legislation is extremely broad and encompasses commercial activities ranging from a classic principal/agent relationship to franchising and distribution relationships, without drawing any legal distinction between these. For this reason the words franchisee and agent are used interchangeably.

In general the legislation champions the rights of the local commercial agent, normally at the expense of the foreign principal, and imposes certain restrictions on the actions of principals while conferring benefits on the local agents. The rationale behind this seems to originally stem from the perception that commercial agents are often in a relatively weak position when contracting with principals, although whether this is in fact true in today’s market ‘ with more and more companies seeking to expand their customer base and develop new markets ‘ is highly debatable.

Any commercial agency covered by the Agency Law must be registered in the commercial agencies register maintained by the Ministry of Economy in the relevant Emirate or, if the rights granted pertain to the entire UAE, with the Ministry of Economy in Abu Dhabi. In order for an agreement between a principal and agent to be registered:

– The franchisee, if a natural person, must be a UAE national, or if a corporate entity, its entire shareholding must be held by UAE nationals; and

– Exclusivity (either in any one or in more than one of the Emirates) must be granted to the franchisee; and

– The agreement will be required to be in Arabic and the signatures thereto must be notarised.

There is little doubt that the registration of an agreement under the provisions of the Agency Law is for the benefit of the agent/franchisee. This becomes abundantly clear when examining the termination provisions, and potential consequences thereof.

Under Article 8, notwithstanding the written terms of an agreement, no termination of or failure to renew a registered agency agreement is effective unless there is a ‘valid reason’ for the termination, or the parties expressly agree thereto. Whether or not a valid reason exists is determined by the Commercial Agencies Committee, a committee especially created to administer relationships established under this law. The legislation is silent on what constitutes a ‘valid reason’, however this may include:

Failure by the agent to meet specified agreed sales targets;
Where the actions of the agent damage the reputation of the principal or its products or services; and where the agent undertakes activities pertaining to other products which compete with the products or services of the principal.

Any breach by the agent on which the principal may seek to rely in being able to terminate, will have to be substantial, material, and result in reasonably severe consequences for the principal, before it will be considered justifiable by the Commercial Agencies Committee.

Unjustified termination (or non-renewal) of an agency agreement by a principal can result in the imposition of compensation awards to the agent. The exact calculation of a compensation payment is not set out in the Agency Law, however the following are often taken into consideration in establishing compensation awards:

the duration of the agency agreement;
the demonstrable efforts of the agent in promoting the products or services of the principal; and
the net profit generated by the agent, being the value of the contract.

The Agency Law also provides that a principal may not import any product(s) covered by the agency agreement either directly or indirectly through another agent while the agreement covering the relevant product is registered. If a principal does, it will be liable to compensate the registered agent for commissions earned. The franchisee also has the upper hand in that they can instruct the UAE ports and customs authorities to stop any goods or stock, for which they are the registered agent, entering the UAE without their consent, leaving the franchisor in an extremely difficult position as far as its product is concerned.

It is therefore not surprising that many principals/franchisors do not want their agreements registered, as unregistered agreements would only be subject to the general laws pertaining to commercial contracts, such as the UAE Commercial Transactions Law and Civil Transactions Law.

Notwithstanding the provisions of the UAE Agency law, an ever increasing number of new brands and products (whether registered under the UAE Commercial Agencies Law or not) continue to enter the UAE each year. There seems little doubt that, provided a party wishing to bring a new product or service into the region ‘ whether under an agency, franchise, or distribution arrangement ‘ does so with knowledge of the existing laws, the potential rewards are significant.

3 Things Every Expat Investor Should Do

3 Things Every Expat Investor Should Do

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3 things all expat investors should do

Living in Dubai, Abu Dhabi or anywhere else in the UAE as an expat is a lot of fun and a great way to save for your future.

Whether you spend your Fridays brunching, crashing round the desert in a white Land Cruiser, paddle-boarding round the Burj al Arab or jumping out of a perfectly serviceable aeroplane above the Palm Jumeirah (Spoiler alert: the plane lands at the end, despite what your instructor tells you) you should be thinking about how best to make the money you earn work for you.

Investing in the stock market can be a great way to make your nest egg grow during your time in the Middle East.

There are many ways to pick stocks and a whole horde of people eager to share their methods with you. I won’t be dealing with specific stock-picking techniques in this article though; today I’m simply interested in helping newcomers get started.

Becoming an investor can seem like a daunting process, especially from overseas. I’m here to show you that it can be simple and painless.

There are 3 main things you will need to do to get started; get access to good research tools, read some good books and open a trading account, preferably in that order.

Get access to good research tools

Online trading accounts will sometimes give you access to live stock prices and some even have basic tools for charting and other bits and pieces.

Ideally though, you should register on a website like ADVFN.com that is dedicated to providing market data, analysis tools and discussion forums. Unlike trading platforms that are mainly focussed on tools for buying and selling stocks, information sites like ADVFN provide tools to make your investment decisions easier and better informed.

Quality tools like streaming charts and financial data analysis as well as reliable live prices and Level 2 can make a big difference. The more information at your fingertips, the more empowered you will be, hopefully leading to better investment decisions.

Possibly the most important aspect of a site like ADVFN is its discussion forums. These allow you to chat about companies with other investors, gauge the opinion of the market and increase your knowledge about a stock. They are also a lot of fun to read and take part in.

DYOR ‘ Do Your Own Research ‘ is the mantra of online stock discussion forums and is some of the best advice you’ll receive. Don’t take someone’s excited recommendation for a stock to buy or sell on faith, have a look into the details and make your own decision. A site like ADVFN lets you chat about stocks and get ideas, but also gives you everything you need to do your own research.

Read some good books

A lot of people start investing with no strategy or with poorly formed ideas about which stocks to pick. These are generally the guys who are flat broke and no longer investing 6 months later.

There is no shame in seeing how other people have made a success out of investing and emulating them. Learning from the mistakes and successes of others is fundamentally sensible. Rushing headlong into trading with no plan is not.

Read a few books, don’t just get one and blindly follow it. Every investor has different goals, so one successful person’s rules and ideas might not be completely applicable to your situation. The more you read, the more you will understand about what is involved in investing and what strategy will work best for you.

Books like 101 Ways to Pick Stock Market Winners by Clem Chambers and The Naked Trader by Robbie Burns are good places to start your reading.

Take ideas from your research and mould them to your own personal investment needs. Use the ideas of successful investors to create your own plan.