Introduction
This essay compares United Arab Emirates (UAE) laws with those of other GCC (Gulf Cooperation Council) member countries.
It covers various areas of the UAE laws and other GCC legal systems. GCC countries consist of Kuwait, Bahrain, the UAE, Qatar, Oman, and the Kingdom of Saudi Arabia.
The UAE legal system focuses on the development laws, which favor foreign investors. The UAE has a written constitution. There are executive, judicial, and supreme authorities. These bodies have links with central government.
It also has a ruling family and rulers who have connection with the three branches of government. The UAE has a federal system of government, which consists of seven emirates. Every Emirate has its own ruler.
The UAE has a twofold legal structure. Issues that involve families fall under the Sharia courts. Sharia courts apply to all citizens, including non-Muslims too. People can take divorce, child custody, family affairs, inheritance, and other cases about family affairs to Sharia courts.
The other court is civil, which focuses on business and corporate affairs. In the civil courts, common law applies to all. The UAE also has a Federal Supreme Court as stated under Article 95 of its constitution.
Still, Article 104 states that local judicial authorities have authority of all issues within their emirates. However, these only included cases not assigned to the Federal Supreme Court.
The UAE Law Comparison with Other Gulf Cooperation Council Legal System
The Basic System
We have noted that the UAE derives its laws from Sharia principles, but some elements of the UAE laws originated from the European concepts, particularly in civil laws. These laws may have links to the Egyptian legal system.
In addition, the French system could have influenced some of the provisions in civil laws. In fact, other GCC member states have also adopted the French system in their civil laws.
The UEA has specific laws on “agencies, company law, labor law, and intellectual property, as well as the civil and commercial codes” (Khedr & Alnuaimi, n.d). Structures and provisions of laws under various categories have facilitated the development comprehensive corporate laws.
However, the UAE still has a strict and non-flexible legal system. This has facilitated bureaucracy in the UEA. In fact, this is common in all the GCC member states.
The dual system that involves both Sharia and civil courts has only created a complex system. For instance, while every emirate may have its own federal court, Dubai and Ras al Khaimah have a completely different judicial structure.
Moreover, there are cases assigned to federal courts. This implies that emirates cannot preside over such cases.
Among the GCC member countries, all have written constitutions except Saudi Arabia. However, all six GCC countries have vested authorities in rulers and their families.
Whereas all six states have significantly independent judicial systems, it is only in Kuwait and Bahrain where there is “a clear distinction between the legislative and executive branches of the governments” (Angell, 2006).
Meanwhile, the UAE, Qatar, and Oman have different systems, they have developed their legal systems on a consultative basis. All GCC member countries facilitate arbitration as an effective method of dispute resolution, but they only encourage this method for foreign entities.
Just like the other legal structures in the GCC member states, the UAE also has a complicated legal system. Therefore, those who may not be familiar with the system and its operations may find it confusing and difficult to understand.
One must recognize that the UAE laws and the GCC legal system are utterly different from the European systems. Moreover, the language is also different. Thus, people who may wish to conduct business in the UAE or the GCC member states must worry about this.
Although legal systems in these countries are complex, the basic elements of the law have logical and comprehensible structures. These laws have also undergone several developments over many centuries.
Specifically, the UAE legal structure has experienced several developments as the country strives to react to diverse changes in its society as modern generation introduce new thoughts.
Some developments in the legal systems have improved business conditions for foreign investors (Angell, 2006; Segran, 2011). For instance, the UAE has introduced permanent arbitration tribunals to handle cases of commercial nature.
Quran and Sharia Laws have defined major contents of the legal system in both the UAE laws and other GCC member states. Islam remains the dominant religion of the states and a major source of all laws in all constitutions of GCC states.
It is necessary to note that the direct influences of Sharia laws in the UAE are mainly important under social laws.
One must also remember that Sharia laws have core principles, which also affect commercial laws in the UAE and other GCC countries. While these principles do not directly apply in business laws, they still have significant impacts on drafting and interpretation of business laws.
In some cases, Sharia codes affect Islamic financial systems in all countries, including other countries outside the GCC.
- The laws forbid levying of interests (riba) or usury. Sharia law asserts that money is not a good of trade, and it lacks value over time if not used. Thus, riba lacks justification.
- Sharia wants parties to share risks or profits in their investments based on the proportion of an individual’s investment.
- The law forbids contracts with uncertain terms (gharar). In this context, business parties must understand all terms of a given transaction. Thus, parties agree on terms in advance. This is different from Western practices in which parties to a contract may only engage in partial disclosure.
- Laws in the region require parties to a contract to have the necessary competence to allow them to comprehend and assume responsibility of a contract.
- Parties can only engage in a contract through a free will. Thus, laws in UAE and other GCC states do not tolerate contracts executed under coercion or duress.
Commercial Laws
People who intend to set up businesses in the GCC states may explore various forms of business entities allowed. However, some forms of businesses may not require an established office or an agent in the country.
These may include direct sales from another country to other partners in the GCC states. Some aspects of services may not require an office when one provides services for a registered entity.
However, agreements are mandatory in all cases of business involvement. The interested party may also pursue other forms of businesses that require registration.
All GCC countries allow for the use of commercial agencies. However, this involves a great level of commitment.
Foreigners must establish an agent office with local persons or companies for the aim of selling or distributing goods and services. This is a common standard among all GCC member countries.
There are commercial agency statutes to control all commercial agents.
GCC member states require that any commercial agency “must be registered with a central authority, usually the Ministry of Commerce, and in each of the GCC states, commercial agencies are limited to national citizens” (Angell, 2006).
The laws in Bahrain, Oman, and Kuwait require 51 percent of local ownership for any commercial agency involving foreigners. All GCC member countries consider a commercial agency as an exclusive entity except in Kuwait.
With regard to transactions involving oil and gas or military procurement, it is advisable for foreign-based firms to avoid the use of local agencies.
All GCC countries protect local agents in case of unjustified termination of a contract. In most cases, it is difficult to justify any termination in the absence of gross neglect with the agent. Every statute of the GCC members has defined compensation for termination.
In this regard, the company must compensate for efforts of the agent and all costs incurred, including costs that led to the success of the entity. This protects agents from free and arbitrary transfer of agencies.
In the UAE, Qatar, and Bahrain, foreign entities may establish permanent business offices or branches, but with the local citizens or investors (Terblanche and Wessing, 2009). There are only special exceptions for professional companies or firms working for governments.
In GCC member states, a foreign branch may only be there on a temporary basis for firms working for governments. It is simple to set up a liaison office or a representative branch than to establish an operating branch office in the GCC region. Statutes insist on local ownership.
However, it is critical for foreigners to know that the business legal systems in the GCC member states have restricted functions of liaison offices. For instance, such offices may only engage in marketing and other support services. They cannot generate incomes or execute contracts.
Any sponsor usually receives a sponsorship fee, which both parties could fix or base on a given percentage. In some cases, the sponsor may offer support services like marketing or facilitating government access.
Every GCC member state has laws for companies, which cater for different types of business entities. In most cases, these laws target foreign entities. The GCC member states prefer a limited liability form of ownership for most foreign companies.
All the six countries restrict foreign ownership of companies. The UAE and other states require foreign firms not to have more than 49 percent ownership.
However, countries like “Bahrain, Oman and Saudi Arabia” (Angell, 2006) may allow foreign firms to have more than 49 percent ownership under specific terms with regard to a given business activity.
In some instances, all GCC member states restrict ownership of some business entities to 100 percent by nationals.
Oil and Gas Concession or Contract Laws
Under normal circumstances, most business laws do not apply to the oil and gas industry in the GCC member states. Oil and gas activities remain exclusively government affairs in all GCC member countries.
For instance, central governments control all oil and gas deals through their respective ministries or agencies like ADNOC of Abu Dhabi. Governments own and control most companies, and other support providers in the sector.
The most important legal considerations arise from “international economic and political factors, domestic policies, and needs predominate with laws and legal process” (Angell, 2006). Few contracts exist, but they are not predominant.
Government ministries or agencies that deal with oil and gas operate in a different manner from other agencies. For instance, the UAE lacks any laws or statutory requirements that can control a tendering process in the oil and gas ministries or agencies.
This practice is different because other government ministries and agencies have tendering processes. ADNOC has conditions for tendering in the tendering bid. It awards tenders based on a public or private basis. Some cases may involve formal procedures for bidders.
The government usually requires a bid bond that ranges between one and five percent of the value of the contract. Bidders must have performance bond of ten and 15 percent of the amount of the contract. In addition, they may also need five to ten percent as a maintenance bond for the contract.
Local laws are mainly applicable in cases of disputes and dispute resolution. Local courts are the mechanisms for resolving any conflict, but there are also local tribunals, which may provide any need alternative.
The GCC member states may insist on nationals to take part in the tendering process. However, the UAE does not strictly adhere to this requirement because it allows other specialized foreign firms to take part in the contracting process.
In tendering with foreign firms, the GCC states may favor national firms or offer specific preferential terms. The GCC member countries have initiated reforms in tendering processes with the aim of reducing costs.
Foreign firms must understand that laws in the oil and gas industry differ from one member country to another. Therefore, it is necessary to understand concession and agreement terms in respective areas from different GCC states.
Intellectual Property, Trademarks, and Patents
The UAE lacks strong laws to protect intellectual property rights, trademarks, and patents. In addition, many entities operate without registered trademarks.
This is also the case in other GCC member states. However, these countries have noted the importance of protecting original inventions. As a result, they have formulated new laws to offer such protections (Mahmoud, 2008).
The copyright law of the UAE aims to protect the original author or developer of a work. It reviewed its copyright law in 2002 after the introduction of the first one 1993. The UAE has more than 50 years of a lifetime protection of authors. The conditions differ based on the industry.
The law protects artists, posthumous and juridical works. The UAE law provides 25 years of protection to applied arts, whereas media creations have 20 years. The copyright law protects both Emiratis and people from other countries.
Conclusion
The legal system of the UAE operates on a dual system in which there are Islamic Sharia courts and civil courts. Sharia courts are for social issues while civil courts are mainly for business disputes.
Comparisons with other GCC member countries show that the UAE has liberal laws than other GCC countries. This has happened because of the development in society and influences from international bodies.
For instance, most of the UAE laws for commercial entities are mainly from European laws. Generally, all GCC countries derive their laws and legal systems from Sharia codes. Thus, the laws may be similar in some instances.
References
Angell, N. (2006). An Overview of Legal Structures in The GCC Countries – Issues of Risk and Strength. Web.
Khedr, A., & Alnuaimi, B. (n.d). A Guide to United Arab Emirates Legal System. Web.
Mahmoud, S. (2008). Gulf Law: Corporate & Commercial. Web.
Segran, G. (2011). Bridging the gulf between GCC laws and the West. Web.
Terblanche, P., & Wessing, T. (2009). UAE Company Law Overview. Web.