Emirates Institute For Banking and
Financial Studies
GCC: The Next International
Investment Destination
Abu Dhabi
4-5 May 2004
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GCC: Similarities in Legal
Aspects
‫تماثل الجوانب القانونية في مجلس التعاون‬
Essam Al Tamimi
Managing Partner
Al Tamimi & Company
United Arab Emirates
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After two decades since the formation of the Gulf
Corporation Council, the legal systems of the GCC
(Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and
the UAE) States are now undergoing important
developments such as pro-investment legislation,
policy decisions and decrees that are stimulating the
growth of the private sector, developing the private
capital markets and in turn opening up more to
foreign investors. These developments are shaping
the legal systems of the GCC countries as they
accommodate to modern needs and business
markets.
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Legal Cooperation in the GCC
• Cooperation in the GCC has been in the
following areas:
• The GCC Commercial Arbitration Center,
established in 1995.
• The recently established GCC Customs Union,
unifying custom duties.
• Unified Economic Agreement established in
1981 with the following objectives:
• The Implementation of the GCC Customs
Union.
• The establishment of Monetary Union and a
single GCC currency.
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Legal Cooperation in the GCC
• The GCC Gulf Investment Cooperation, based in Kuwait
with a capital of US$ 2.1 billion. It focuses on the
development of private enterprises and economic growth
in the Gulf Region.
• Standardization and Metrology Organization for GCC in
Riyadh to provide standards for commodities, products,
test methods and calibration.
• The Technical Telecommunications Bureau in Bahrain set
up to ensure conditions for fair competition and to
promote competition in the telecommunications market.
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Legal Cooperation in the GCC
• The Regional Committee for Electrical Energy Systems
registered in Qatar to encourage and facilitate the
exchange of technical and technological information
(such as on power generation between the GCC States).
• GCC Agreement on the enforcement of judgments and
arbitration award dated 4 January 1996 for the service of
summons and enforcement of judgments and arbitration
award among the GCC countries.
• A new incentive has been recently adopted in the GCC
countries to attract foreign direct investments.
• In keeping with the international legislations, all the GCC
countries are either promulgating or approving antimoney laundering laws.
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What the GCC States are trying to achieve
through Cooperation?
• The endorsement of a new economic agreement
to pave the way for the formation of strong and
unified economic block in the Gulf Region
• Has this been achieved?
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The basic similarities in the legal structures
of the GCC Countries
• All the laws and regulations in the GCC
countries are based on a Civil Law model. The
laws and regulations are almost identical in areas
such as Civil Law, Commercial Law, Banking,
Maritime and Litigation.
• Shari’a is the principal source of law, but is
generally applied only in matters such as family
matters, succession, property and to some extent
torts and criminal law.
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The basic similarities in the legal structures
of the GCC Countries
• Almost all the GCC States (with the exception of one
of two treaties) are member to the same international
conventions and treaties.
• All GCC States apart from the UAE are
members of the New York Convention.
• All GCC States are members of the WTO except
for Saudi Arabia.
• All the educational systems, culture and
language seem to be on the same level
throughout the GCC.
• The judicial system is very similar in terms of
personnel, laws and practice. It is all
fundamentally based on the same model.
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The basic similarities in the legal Structures
of the GCC Countries
• The political system is very similar.
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Where is the similarity in the legal structure
of the GCC States?
In addition to the agreements and the treaties
signed by the GCC States, the following
similarities exists:
• All the GCC legislation comes from a similar
background with same scholars driven from the
same jurisprudence as advised above.
• All GCC States tend to concentrate on similar
sectors and almost identical incentives.
• Commercial entities
• Offshore or Free Zone entities.
• 49% Foreign ownership in companies.
• Investment laws.
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Where is the similarity in the legal structure
of the GCC States?
•
•
•
•
•
Offshore banking.
Oil and Gas related industries.
Encourage local and foreign industries.
Foreign investment laws.
Restrictions on particular activities,
ownership.
• React to international changes in a similar
fashion (i.e. money laundering laws and anti
terrorist laws.)
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Introduction of Investment Laws
• Anti- money laundering laws
• Relaxation of foreign ownership whether that of
investment law, free zone or offshore
companies.
• Opening of banking and finance sectors
• Relaxation of property laws to allow foreign
ownership for industrial projects or residential.
• Incentive on large projects for local and foreign
investors.
• Encouraging similar sectors such as security
market attracting foreign capital and avoiding
labour incentive projects.
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Introduction of Investment Laws
• Growth of particular sectors such as the Islamic
Finance, banking, property market, commercial
agencies, franchise and medium to large
industries mainly related to oil and gas
industries.
• Same security concern and accordingly similar
legislation combating terrorism, anti-money
laundering and crimes.
• In large the aim is to set up an EU – style
Monetary Union, adopting the same currency
and associated monetary policies to facilitate
decision making and help generate foreign
investments and single Gulf financial market. 14
How the GCC Laws are working?
• While the intention and the motive is clear,
mechanism to implement is not there.
• Most of the GCC laws which have been enacted
by the GCC States have not been implemented
fully.
• There is a tendency to legislate in certain areas
but no agreement on the mechanism to
implement what has been agreed upon.
• The lack of training and follow up add to the
problem. The implementation of the law in
different jurisdictions tend to vary in its style
and strength depending on the interpretation of
the personnel in each jurisdiction.
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How the GCC Laws are working?
• There is no central legislation body in some of
the GCC countries which results in local law
conflicting with some of the provisions of the
GCC agreements.
• The lack of coordination seems to have helped
certain States in moving away with their own
legislation in a fashion and concept which is
slightly different from that being adopted by the
other GCC States.
• Not addressing the relevant issues clashes in
practice with the law upon implementation.
Careful and skilled drafting is required.
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How the GCC Laws are working?
• Unifying laws relating to basic areas such as
civil, commercial, shipping, criminal, antimoney laundering and other non essential laws is
a fundamental factor which could help moving
forward.
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Is there any law that does not match among
the GCC States?
• Labour and Immigration laws viz-a-viz foreign
•
•
•
•
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•
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visitors, tourists or foreign investors.
Tax and governmental charges.
Foreign investment laws and incentive granted to
foreign investors.
Ownership of companies and properties.
Shipping and movement of cargo.
Aviation and air transport.
Banking and finance though an initiative is being made
to bring this together but with limited success.
Investment in the capital market and stock market
among the GCC States and GCC nationals.
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Is there any law that does not match the GCC
States?
• Nationalization and granting of citizenship.
• Treatment of free zone and offshore entities or
products produced within the free zones.
• Commercial Agency law and franchise law
relating to the distribution and sale of goods and
services.
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What different GCC States now have and
implemented?
• Companies, criminal, civil and arbitration laws
are very similar.
• Limited implementation of the GCC Agreement.
• Preparation
and
continuation
to
the
implementation of the WTO requirements
whether on goods, services or protection of
intellectual property.
• Basic brief non-essential investment law to
encourage foreign investments into the countries. 20
What different GCC States now have and
implemented?
• Free zones and offshore companies such as the
Jebel Ali Free Zone, DIFC or other laws such as
Bahraini offshore banking laws. It all encourages
investments in major infrastructure projects,
warehousing, industrial, logistics and wholesale
banking and finance.
• Opening of the security market is limited to a
few companies rather than the market.
• Investment laws in countries such as Saudi
Arabia, Oman and Bahrain and recently Kuwait
allow for ownership of business over the 50%
traditional limit.
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What different GCC States now have and
implemented?
• Relaxation on foreign ownership of banks or the
establishment of foreign ownership but no major
activities on ground apart from Saudi Arabia and
to some extend Bahrain, which allow foreign
banks to set up in their jurisdiction. My
understanding is that other GCC countries will
follow, including the UAE.
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What challenges are the GCC States facing in
respect of banking, investment and finance?
• The GCC States are targeting to achieve
monetary union by the year 2010 and much needs
to be accomplished for this to materialize.
• The GCC States need to identify and agree upon
the philosophy behind their legislation for the
legislation to be well drafted and can be
implemented with no problem. So far this has not
taken place.
• The GCC States need a strong, well structured
legislative body to make the GCC Laws and
regulations comprehensive and inclusive of what
is implemented in each State as well as what has 23
been implemented elsewhere.
What challenges are the GCC States facing in
respect of banking, investment and finance?
• It is important for the GCC States (which is part of the
current problem) to agree on what needs to be
addressed by the GCC as a block in terms of laws and
legislations jointly and what needs to be addressed by
the individual States on their own separately. Currently
there is a mix which is conflicting with what has been
enacted.
• There are simple laws and regulations which can be
addressed immediately without any implication
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What challenges are the GCC States facing in
respect of banking, investment and finance?
on the GCC States and can help to bring the GCC
together in the future i.e. where is the harm in
having a unified civil, commercial, shipping and
family law among the GCC States. It’s already
similar why don’t we have it as one?
• There is no conflict from a legalistic point of
view in having unified laws among the GCC
countries to encourage foreign investments and
relaxation on certain rules and regulations as well
as further incentives to be granted by each state
individually. This is a practice that exists
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elsewhere.
What challenges are the GCC States facing in
respect of banking, investment and finance?
• Training is part of the process and the move
should not be just to enact and introduce but to
implement and train.
• The current investment, insurance and banking
laws are short of meeting the GCC nationals
expectations and those of the international
investors who are otherwise attracted to the area.
• Being an economic block is no more an idea, it is
a necessity to achieve growth.
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THANK YOU
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