GCC Quarterly Review - Q3 2017

The GCC Quarterly Review briefly summarises a selection of the major developments in the laws of the Gulf Cooperation Council ("GCC") region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) in the third quarter of 2017, with links to further reading, where available.

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

Latest developments VAT implementation in the GCC: The GCC Member States (Saudi Arabia, Bahrain, Kuwait, Qatar, Oman and the United Arab Emirates (“UAE”)) are preparing to implement Value Added Tax regimes based on the VAT principles agreed in the Unified GCC Agreement for Value Added Tax (the “GCC UAVAT”). The GCC UAVAT framework allows for a basic rate of VAT on supplies of goods and services of 5%, as well as allowing such supplies to be zero-rated or VAT exempt depending ultimately on the domestic legislation of each country. Saudi Arabia and the UAE will be the first to implement VAT on 1 January 2018, with other GCC states expected to follow during 2018, ahead of the deadline of 1 January 2019. Key recent developments include:

  • The UAE issued its domestic VAT law in August (Federal Law No. 8 of 2017) and a law on tax procedures (regulating the administration, collection and enforcement of tax by the Federal Tax Authority (FTA), a body established in 2016) in June (Federal Law No. 7 of 2017). The VAT law specifies a list of 14 zero-rated goods and services (including those related to transport, crude oil and natural gas, real estate, education and healthcare) and four types of exempt supplies (including certain financial services to be specified in forthcoming implementing regulations and some real estate and transport supplies). Some details of the new regime are yet to be specified in implementing regulations expected to be published later this year. One key issue to be addressed is the VAT position in free zones within the UAE and whether these will be determined to be “Designated Zones” for the purposes of the VAT law, which are considered to be outside of the state and VAT exempt. The Federal Tax Authority (FTA) website has also been launched, where relevant businesses will soon be able to register online.
  • Saudi Arabia published its VAT law in July and has launched the online VAT registration process. Saudi Arabia’s Tax Authority, the General Authority of Zakat and Tax (GAZT), has also approved related implementing regulations. There are few zero-rated or exempt items under the Saudi Arabian VAT regime. Certain financial services supplies, including Islamic finance products, are exempt from VAT.
  • In Kuwait, a draft VAT law is making its way through the legislative process and is reported to have been approved by the Cabinet and referred to the National Assembly for consideration.

Abu Dhabi Global Market announces establishment of new arbitration institution: A new ADGM Arbitration Centre is set to launch in Abu Dhabi’s financial free zone, Abu Dhabi Global Market (ADGM) in early 2018. It will house the representative office for the International Court of Arbitration of the International Chamber of Commerce (ICC). Once operational, the ADGM Arbitration Centre will be able to register and administer arbitration cases under the ICC Rules. It will offer parties an alternative arbitration forum, in addition to the DIFC-LCIA Arbitration Institution in the Dubai International Financial Centre (DIFC) and “onshore" institutions, including the Dubai International Arbitration Centre (DIAC). Read more about ADGM.

Saudi Arabia to allow full foreign ownership in engineering and construction sector: Saudi Arabia has announced plans to allow up to 100 per cent foreign ownership of construction and engineering businesses as well as businesses in the health and education sectors, according to an announcement by the Saudi Arabian General Investment Authority (SAGIA). The relaxation of foreign investment restrictions in this area forms part of a general movement of liberalisation in Saudi Arabia, following the opening up of the Saudi stock exchange (Tadawul) to qualified foreign financial investors in 2015 and the subsequent liberalisation of foreign investment restrictions in the retail and wholesale sector (read more). Looking ahead, foreign investment in Saudi Arabia may increase if it accedes to the MSCI Index, the index provider tracked by investors, but this depends on further reforms occurring.

DIFC Court enforces New York court judgment: The DIFC Court has enforced a judgment of the Supreme Court of the State of New York for the first time in (1) Barclays Bank PLC (2) Credit Suisse Loan Funding L.L.C. (3) Midtown Acquisitions L.P. (4) Special Situations Investing Group Inc v Essar Global Fund Limited [2016] (DIFC CFI 036). The judgment confirmed that the DIFC Court has jurisdiction to enforce foreign court judgments, following the decision of the DIFC Court of Appeal decision in the DNB Bank ASA v Gulf Eyadah Corporation & another [2015] DIFC CA 007 which “dealt authoritatively” with the question of the DIFC Courts’ jurisdiction in this area and unanimously rejecting arguments raised by the Defendant to the contrary.

Judicial Tribunal for the Dubai Courts and DIFC Courts awards Dubai Courts jurisdiction in “conduit” cases: The Judicial Tribunal for the Dubai Courts and the DIFC Courts, established in 2016 to rule on conflicts of jurisdiction and conflicts of judgments between the two courts, has issued two recent decisions in cases where claimants obtained an order from the DIFC Courts recognising arbitral awards made outside the DIFC, where there was no connection with the DIFC, and where the order recognising the award was referred for enforcement to the Dubai courts for enforcement against assets located there. In Cassation No. 1 of 2017 (JT), the Judicial Tribunal ruled that a London-based arbitral award was not enforceable in the DIFC Courts in accordance with the New York Convention 1958 because the debtor had brought parallel proceedings with the Dubai Courts-affiliated Centre for Amicable Settlement of Disputes. The Judicial Tribunal is reported to have decided that the Dubai Courts had jurisdiction to hear the case, on the basis that they have "general jurisdiction" in the event of a conflict of jurisdiction, and the DIFC Courts should cease to entertain the case. The decision is surprising as it appears to conflict with DIFC law and because proceedings in the Centre for Amicable Settlement of Disputes were considered parallel proceedings, despite those proceedings not being in the Dubai courts proper. In Cassation No. 3 of 2017 (JT), the Judicial Tribunal decided that, because two parallel claims over the annulment and enforcement of the same award were being entertained in the DIFC Courts and Dubai Courts, there was a conflict of jurisdiction and only the Dubai Courts should have jurisdiction. The decisions of the Judicial Tribunal are final, unappealable and binding. Read more about the Judicial Tribunal.