Designer / Architect Delay Claims: Insights from the Ontario Superior Court of Justice

  In the realm of construction, project delays are inevitable yet potentially costly occurrences. The ability to accurately identify and claim these delays is a crucial skill for any party involved in a construction project. A recent case from the Ontario Superior Court of Justice in Onespace Unlimited Inc. v. Plus Development Group Corp. sheds light on the evidentiary standards required to substantiate claims of project delays, particularly for claims related to design errors and omissions. Overview In this case, the owner/developer claimed a sum of about $760,000 for a 100-day extended duration delay allegedly caused by the architect due to various design errors and omissions. The alleged errors encompassed a wide range of issues including missing gas lines, incorrect details for a windowsill, inadequate personnel, and poor work review, among others. However, the court found several shortcomings in the owner/developer’s claim. Firstly, there was a lack of clarity in defining the alleged design errors and omissions. The owner/developer failed to identify the specific drawings containing these errors, which is a fundamental step in substantiating a claim of design-related delays. Without pinpointing the exact source of the errors, it becomes a herculean task to prove the alleged delays. Furthermore, the court noted a significant lack of evidence supporting the claim that the architect was responsible for these errors and omissions. The days of delay claimed were merely unsubstantiated estimates provided by an individual from the owner/developer’s side, which were reviewed but not corroborated with concrete evidence demonstrating the impact on the overall project duration. The court also highlighted an essential distinction between a delay event and an overall project delay. A delay in a particular activity does not necessarily translate to an extended project duration. For a claim of extended duration to hold water, a causal link between the alleged delays and the extended project duration is imperative. The owner/developer’s failure to provide evidence corroborating the delay from the alleged errors and omissions was a significant blow to their claim. Moreover, the court found that the owner/developer did not meet the evidentiary onus of demonstrating any breach of contract or the standard of care by the architect, which would support liability for the alleged project delays. This underlines the necessity of a well-documented and evidence-backed claim when alleging project delays. This case serves as a stark reminder of the rigorous evidentiary standards required to successfully claim project delays. It emphasizes the importance of clear documentation, precise identification of errors, and the provision of cogent evidence to support claims of project delays in the complex landscape of construction disputes. Takeaway Evidencing delay caused or not caused by design errors and omissions generally requires a delay claim methodology, which in most cases is a schedule analysis. In a schedule analysis aimed at identifying delays due to design errors and omissions, the process begins with a thorough review of the project’s baseline schedule and the as-built schedule. The baseline schedule represents the initial plan, while the as-built schedule reflects what actually transpired on the ground. The crux of the analysis lies in identifying the design errors and omissions through a careful examination of the design drawings and other related documentation. Once these errors are identified, they are mapped to the specific activities in the schedule they affected. This mapping is crucial as it establishes the link between the design discrepancies and the activities that were delayed as a result. The next step involves quantifying the delay caused by each design error or omission. This is achieved by comparing the planned and actual completion dates of the affected activities. The difference in completion dates illustrates the extent of delay attributable to the design errors. Furthermore, the analysis delves into how these delays impacted the overall project timeline. It is not just about identifying the days of delay, but also understanding how these delays affected the sequence of activities, especially those on the critical path which directly impact the project’s completion date. The data extracted from this analysis provides a clear illustration of the delay days caused by design errors and omissions. It evidences the direct and indirect impacts of these errors on the project schedule, thereby providing a solid foundation for any claims or discussions related to project delays. In essence, the schedule analysis serves as a practical tool to not only identify and quantify the delays but also to provide a clear, evidence-backed narrative of how design errors and omissions contributed to these delays.

Supreme Court of Victoria Affirms Judicial Restraint in Arbitral Appeals

  In the realm of arbitration, the delicate balance between finality and fairness often finds itself at the heart of appellate scrutiny. The recent judgment from the Victorian Supreme Court in Factory X Pty Ltd v Gorman Services Pty Ltd unveils yet another layer of this intricate interplay, particularly focusing on the threshold for leave to appeal questions of law emanating from arbitration awards. The court’s reasoning, deeply rooted in the principles laid down by Lady Justice Arden in HMV UK Ltd v Propinvest Friar Limited Partnership, provides a rich tapestry for understanding the nuanced approach towards the ‘obviously wrong’ standard under s 34A(3)(c) of the Commercial Arbitration Act 2011 (Vic). The focal point of the discourse centers around Lady Justice Arden’s clarification of an ‘obviously wrong’ decision as one that is unarguable, makes a false leap in logic, reaches a result for which there is no reasonable explanation, or represents a major intellectual aberration. The respondent, in underscoring these parameters, argued that a mere arguable error on a point of law or a divergent conclusion by the judge does not suffice to meet the threshold of ‘obviously wrong’. The clarity and transparency of the error, as emphasized by the respondent, stand as indispensable requisites to traverse the appellate pathway. The court, in its analysis, concurred with the respondent’s submissions, accentuating that the arbitrator’s decision should not be deemed ‘obviously wrong’ merely because the court might harbor a different interpretation of a contractual clause. This stance resonates with the fundamental ethos of arbitration, where deference to the arbitrator’s decision is emblematic of the autonomy and finality that arbitration envisages. Furthermore, the court’s acknowledgment of the arbitrator’s rejection of the applicant’s construction in the arbitration award underscores the appellate reluctance to re-engage with matters of critical relevance already deliberated and dismissed by the arbitrator. This judicial restraint is emblematic of a broader jurisprudential acknowledgment of the arbitrator’s role as the primary adjudicator of disputes, whose decisions are to be interfered with sparingly and only under manifestly erroneous circumstances. The South Australian Court of Appeal’s stance in Inghams Enterprises (10 February 2022), as highlighted by the court, further cements this principle. Despite recognizing the ‘some force’ in Inghams’ submissions and the complex nature of the construction question, the Court was unpersuaded that the arbitrator’s decision displayed any ‘obvious error’. This narrative underscores the high threshold that appellants must surmount to successfully navigate the appellate avenue. In dissecting the contract clause, the court acknowledged the lack of clarity in its drafting and the applicant’s submissions on the practical implications of the arbitrator’s construction. However, the court remained unswayed by the possible merits of the applicant’s construction, reiterating that the arbitrator’s conclusion was not ‘obviously wrong’ for the purposes of s 34A of the Act. The arbitrator’s meticulous consideration of other possible constructions, including those submitted by the applicant, fortified the court’s stance against an obvious error in the arbitrator’s decision. This judgment, in its essence, epitomizes the judicial restraint and deference towards arbitration awards, reinforcing the high threshold for leave to appeal on questions of law. It underscores the imperative for clear and transparent errors in arbitration awards to warrant appellate intervention, thereby preserving the sanctity and finality of arbitration as a distinct and autonomous mechanism for dispute resolution..

Exceptional Taxation: UAE Supreme Court Rules on Domestic and Foreign Related Companies’ Tax Liabilities

  The recent judgment delivered by the Federal Supreme Court regarding the application of tax liabilities to related companies, even those situated outside the state, in exceptional circumstances where the tax event occurs within the state, is of paramount importance. It not only delineates the legal boundaries of tax obligations among interconnected corporate entities but also sets a precedent for how tax laws are interpreted and applied in cross-border corporate scenarios. This judgment underscores the necessity of a nuanced understanding of the legal and fiscal framework governing such entities, thereby providing a robust foundation for tax planning and compliance, especially in an increasingly globalized business environment. Tax events amongst related entities The Federal Supreme Court’s analysis concerning a tax event and the separation of liabilities among multi-entity enterprises is a nuanced examination of the legal and fiscal responsibilities that these entities bear. The court’s reasoning on the matter sheds light on the intricate fabric of corporate law and tax obligations, particularly in the context of parent and subsidiary companies or branches. The court underscores the distinct legal persona of a subsidiary company, which is conceived through the collaboration of another company, yet operates independently from its parent company. This independence is manifested in its legal and moral personality, enabling it to acquire rights and bear obligations. The subsidiary, with its unique name and domicile, operates as a separate legal entity, its nationality remaining unblended with that of its partners or parent company. On the other hand, the tax event, as delineated by the court, is a pivotal circumstance that triggers tax liability. The court adopts a clear standard in identifying the tax event, which is fundamentally the supply of goods within the state. This standard is instrumental in determining the tax liability, which is incumbent upon the entity where the tax event is realized. The separation of liabilities among multi-entity enterprises is a complex domain, necessitating a meticulous examination of the legal and fiscal dynamics that govern the relationships between parent companies, subsidiaries, and branches. The court’s analysis provides a robust framework for understanding these dynamics and the legal parameters that define tax liability in the context of multi-entity enterprises and multinational companies. The Supreme Court says in this regard: “The subsidiary company is the company that is co-founded by another company and is independent. Originally, from a legal standpoint, it is independent of the parent company, and its legal and moral personality is established, which qualifies it to acquire rights and bear obligations. It is considered a separate legal entity from the partners and the parent company. The subsidiary company has an independent name and domicile, which is the place where its main administration is located. Also, its nationality does not mix with the nationality of the partners. The person liable for tax is the one in whom the event established by law is available. The legislator adopted a clear standard in determining the event that creates the tax liability.” Tax liabilities for out-of-state entities The Federal Supreme Court’s analysis on the application of tax liabilities to related companies, even those situated outside the state, in exceptional circumstances where the tax event occurs within the state, unveils a nuanced understanding of the legal and fiscal framework governing such scenarios. The Court emphasizes the sanctity of the distinct legal persona of each company, underscoring the principle that the tax liabilities of one cannot be arbitrarily imputed to the other. However, it carves out an exception to this rule in extraordinary circumstances, thereby introducing a layer of complexity to the tax liability discourse. The Court’s stance is rooted in a logical necessity that once the tax event is realized, the tax assessment becomes anchored in the legal truth. This notion of a tax event is pivotal as it triggers the tax liability, and its occurrence within the state’s jurisdiction is a critical factor in determining the tax obligations of related companies. The Court highlights that the tax liability is not merely a function of the corporate structure or the domicile of the companies but is intricately tied to the locus of the tax event. This analysis brings to the fore the concept of exceptional circumstances as a determinant of tax liability. The Court posits that in such rare scenarios, the veil of separate legal persona of related companies may be pierced, allowing for the tax liabilities to be assessed in a manner that transcends the conventional boundaries of corporate separateness. This is a significant departure from the traditional understanding of tax liability as being confined to the entity where the tax event is realized. Furthermore, the Court’s discourse illuminates the legal rationale underpinning this exception. It underscores the imperative of a rational and equitable assessment of tax liability, particularly in scenarios where the strict adherence to corporate separateness may lead to an unjust enrichment or evasion of tax obligations. The Court’s analysis is grounded in a pragmatic understanding of the fiscal realities, recognizing the potential for cross-border corporate structures to be employed in circumventing tax liabilities. The Court’s exposition also hints at a broader legal and fiscal paradigm wherein the principles of equity and justice are harmonized with the tenets of corporate law and tax policy. It invites a reevaluation of the legal doctrines governing the assessment of tax liability, particularly in the context of multi-company enterprises with cross-border operations. Moreover, the Court’s narrative underscores the imperative for a meticulous examination of the circumstances surrounding the tax event, advocating for a judicious approach in the assessment of tax liabilities. This nuanced understanding of tax liability, as expounded by the Court, provides a robust framework for navigating the complex terrain of tax law, particularly in scenarios involving related companies with cross-border operations. The Supreme Court says in this regard: “It was decided, according to the judgment of this court, that the legal personality of both companies must be respected, and it is not permissible to penetrate it or decide the liability of one for the tax debts of the other, except

Ownership, Control, and Nationality in Investor-State Dispute Settlement: Analysis of 2021 Cases (UNCTAD Review)

  Navigating the labyrinthine complexities of Investor-State Dispute Settlement (ISDS) often requires a discerning eye for detail, especially when it comes to pivotal issues such as ownership, control, investor nationality, and corporate structuring. The 2021 review by the United Nations Conference on Trade and Development (UNCTAD) published in July/August 2023 serves as a recent cartography of this intricate landscape, shedding light on how arbitral tribunals have approached these multifaceted questions. This article highlights these dimensions, guided by the interpretive subtleties and judicial temperaments exhibited in recent tribunal decisions. Çap and Sehil v. Turkmenistan: Ownership and Third-Party Funding The tribunal in this case was confronted with the question of whether it had jurisdiction over the claimants, considering the allegation that the claims had been assigned to a third-party funder with non-Turkish nationality. The tribunal found that no evidence had been presented to suggest that the claimants were no longer the proper owners of the claims. This decision underscores the need for concrete evidence when challenging the ownership of claims, particularly in the context of third-party funding. Carrizosa Gelzis v. Colombia: Dual Nationality and Dominant Nationality The tribunal had to determine its jurisdiction over the claimants, who were dual nationals of the United States and Colombia. The tribunal found that Colombia was the center of the claimants’ professional, private, and public lives at the critical dates. Consequently, it concluded that the dominant and effective nationality of the claimants was Colombian, not American. This decision highlights the importance of the “dominant and effective nationality” test in ISDS cases involving dual nationals. Eco Oro v. Colombia: Nationality Requirement and Beneficial Ownership The tribunal had to ascertain whether Eco Oro met the nationality requirement under the Canada–Colombia Free Trade Agreement (FTA) and whether it was owned or controlled by Canadian investors. The tribunal found in favor of Eco Oro on both counts, emphasizing that the respondent did not present any evidence of actual control by non-Party investors. This decision elucidates the need for a meticulous examination of beneficial ownership and control structures in ISDS cases. Fynerdale v. Czechia: Corporate Structuring and Jurisdiction The tribunal had to decide whether the alleged investments made by a Dutch entity through a Maltese company were protected under the Czechia–Netherlands BIT. The tribunal declined jurisdiction on another basis, rendering it unnecessary to entertain this argument. Nevertheless, the case raises pertinent questions about the role of corporate structuring in determining the jurisdiction of arbitral tribunals. Hope Services v. Cameroon: Denial of Benefits and Ownership The tribunal had to determine its jurisdiction over the claims despite the respondent’s invocation of the denial of benefits clause. The tribunal found that the respondent’s invocation was not valid, as it failed to “promptly consult” with the United States, the other contracting party to the BIT. Moreover, the tribunal found that the claimant did not own or control investments in the online platform and related government contracts. This decision accentuates the procedural and substantive aspects of invoking the denial of benefits clause in ISDS cases. Infracapital v. Spain: Abuse of Process and Good Faith The tribunal had to decide whether it had jurisdiction over the claims, considering the respondent’s objection that there was an abuse of process or lack of good faith on the part of the claimants. The tribunal found no elements to sustain such allegations, emphasizing that the investment was not restructured solely for gaining access to investment arbitration. This decision serves as a cautionary tale against hastily alleging abuse of process or lack of good faith without substantial evidence. Littop and Others v. Ukraine: Minority Shareholding and Business Activities The tribunal had to ascertain whether the claimants had an investment under the Energy Charter Treaty at the time the arbitration was commenced. The tribunal found that they did not, as they failed to prove ownership of any Ukrnafta shares at that time. Moreover, the tribunal found that the claimants did not have substantial business activities in Cyprus, the alleged home state. This decision underscores the importance of proving ownership and substantial business activities in the alleged home state for establishing jurisdiction. MAKAE v. Saudi Arabia: Control and Physical Presence The tribunal had to decide whether it had jurisdiction over the claims, considering the respondent’s allegation that the claimant did not control the investment in the host State. The tribunal found that the claimant had no ownership interest in the alleged investment and did not exercise de facto control over it at any relevant time. This decision highlights the need for concrete evidence of control and ownership for establishing jurisdiction in ISDS cases. Pawlowski and Projekt Sever v. Czechia: Incorporation and Control The tribunal had to decide whether the claimants qualified as protected investors under the Czechia–Switzerland BIT, considering the respondent’s objection that Pawlowski AG had neither real economic activities nor its seat in the alleged home state Switzerland. The tribunal found that Pawlowski AG was incorporated under the laws of Switzerland and fully owned and controlled by a Swiss national, thereby qualifying as a protected investor. This decision emphasizes the significance of the place of incorporation and control in determining the status of a protected investor. Concluding Remarks: The Temperament of ISDS Tribunals in the Current Landscape In synthesizing the jurisprudential landscape delineated by the UNCTAD’s 2021 review, one cannot overlook the discernible temperament of ISDS tribunals as they navigate the intricate corridors of ownership, control, nationality, and other pivotal issues. The tribunals have exhibited a proclivity for rigorous evidentiary scrutiny, eschewing superficial analyses in favor of a more nuanced, fact-intensive inquiry. This is not merely a matter of jurisprudential preference but a reflection of the tribunals’ cognizance of the gravity of their mandates. The tribunals have demonstrated an acute awareness of the dual imperatives that underpin ISDS proceedings: the need to safeguard the legitimate expectations and rights of foreign investors, and the equally compelling need to respect the sovereignty and regulatory prerogatives of host states. This delicate equipoise is manifest in the tribunals’ approach to questions of ownership and control, where

“You are not a horse.” – How the US Court’s Ruling on COVID and Ivermectin Impacts Global Industries

  In an era marked by the global upheaval of the COVID-19 pandemic and the ensuing debates around treatments like Ivermectin, a recent pivotal U.S. Court of Appeals for the Fifth Circuit judgment serves as a beacon of clarity, in Apter et al. v. Dep’t of Health & Human Services et al (No. 22-40802). The judgment, which delves into the nuanced distinction “between telling about and telling to,” has implications that reverberate far beyond the healthcare sector. It serves as a timely reminder of the delicate balance that regulatory bodies must maintain in their interactions with various industries. The judgment comes at a critical juncture, where the line between guidance and directive action has been blurred by the urgency of the pandemic and the hyperbole that often accompanies it. In such times, the role of regulatory bodies becomes even more pivotal, not just in healthcare but across a spectrum of industries that form the backbone of modern society. From construction and finance to new technologies and private wealth management, the judgment underscores the importance of regulatory restraint and nuanced communication. As we navigate through the complexities of this judgment, we will explore its implications across diverse sectors, shedding light on the intricate dance between regulatory bodies and industries. This exploration is not just an academic exercise; it is a crucial endeavor to understand the commercial consequences and potential liabilities that may arise when industries rely on non-directive government policies, public instructions, private notifications, and more. In the following sections, we will delve into the multifaceted interactions between regulatory bodies and various industries, offering a global perspective on a judgment that, while rooted in American jurisprudence, has global reverberations. Background The dispute involving the United States Food and Drug Administration (“FDA”) and three medical practitioners (“the Doctors”). The crux of the issue lies in the FDA’s public advisories concerning the use of the drug ivermectin for the treatment of COVID-19, and the alleged impact of these advisories on the medical practice of the Doctors. The FDA, in its role as a regulatory body, issued public statements and utilized social media platforms to dissuade the general populace from employing ivermectin as a treatment for COVID-19. The agency employed phrases such as “You are not a horse” to underscore the point that ivermectin, particularly the version formulated for animals, is not approved for treating COVID-19 in humans. This messaging was part of a broader strategy aimed at public health and safety. The Doctors, on the other hand, contend that they have been prescribing the human version of ivermectin to their patients as a treatment for COVID-19. They argue that the FDA’s public advisories have not only interfered with their medical practice but have also inflicted reputational harm. They further assert that the FDA’s actions are in violation of its enabling act and the Administrative Procedure Act. The district court initially dismissed the Doctors’ claims, invoking the doctrine of sovereign immunity to shield the FDA and associated officials. However, the United States Court of Appeals for the Fifth Circuit took a divergent view. The Court held that the Doctors could indeed proceed with their claims under the Administrative Procedure Act, bypassing the barrier of sovereign immunity. The Court reasoned that the FDA’s advisories could plausibly be considered “ultra vires” actions, as they ventured into the realm of medical advice, a domain not within the FDA’s statutory mandate. In light of the foregoing, the Court of Appeals reversed the district court’s judgment and remanded the case for further proceedings. The Court of Appeals’ judgment opens the door for a more nuanced exploration of the tension between regulatory advisories and the autonomy of private sector professionals. Reasoning The FDA had argued that the social media posts neither “directed” consumers nor any other parties to act or refrain from acting in a specific manner, and thus should not be classified as rules under administrative law. Contrary to the FDA’s position, the court found that the posts contained imperative elements that transcended the realm of mere factual dissemination. The FDA had also posited that these posts could not be considered rules as they did not “prescribe…policy.” This line of argument was dismissed by the court, which noted that the FDA itself conceded that the posts “generally recommended that consumers not take ivermectin to prevent or treat COVID-19.” The court discerned no material distinction between an agency employing imperative language to recommend a general course of action and one employing similar language to prescribe a policy. Moreover, the FDA’s assertion that the posts were nonbinding and did not signify the conclusion of the agency’s decisional process was found to conflate the criteria for determining what constitutes action with those for determining finality. The court clarified that “nonfinal action” remains action under the law. It also rejected the FDA’s attempt to impose a finality requirement for a waiver of sovereign immunity, particularly in the context of the Doctors’ ultra vires claim, which constituted a non-statutory cause of action. The court adjudicated that the posts constituted “agency action,” thereby laying down a legal benchmark that could profoundly affect the nuanced distinction “between telling about and telling to.” This verdict not only invites further judicial exploration but also carries sweeping implications across diverse sectors. Specifically, it raises questions about the commercial repercussions of depending on non-directive government policies and the potential liabilities that may arise as a result. Finding The court emphasized that while the FDA has the authority to “inform, announce, and apprise,” it does not possess the authority to “endorse, denounce, or advise” on medical matters. The Doctors had plausibly alleged that the FDA’s posts crossed this critical boundary, shifting from the realm of “telling about” to “telling to.” The court agreed, affirming that the Doctors could use the Administrative Procedure Act to assert their ultra vires claims against the FDA and associated Officials. The court went further to state that even “tweet-sized doses of personalized medical advice” are beyond the FDA’s statutory purview. This statement underscores the court’s

Unveiling the Veil of Arbitration Secrecy: The Supreme Court of Western Australia in Wright Prospecting v Hancock Prospecting

  Introduction The issue of confidentiality in arbitration proceedings has been a subject of considerable debate and judicial scrutiny. The recent case of Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [2023] WASC 285 issued on 31 July 2023 in the Supreme Court of Western Australia provides a compelling backdrop to explore this complex issue. This article will delve into the nuances of confidentiality in arbitration, with a particular focus on the Wright Prospecting case, while also referencing other seminal cases that have shaped this area of law. The Essence of Confidentiality in Arbitration: A Case Spotlight Confidentiality is often cited as one of the key advantages of arbitration over traditional litigation. In the case of Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd, the court grappled with the issue of whether interim suppression or non-publication orders were necessary to prevent prejudice to the proper administration of justice. The case serves as a vivid illustration of the delicate balance courts must strike between upholding confidentiality and ensuring open justice. Judicial Tests for Confidentiality: The Wright Prospecting Lens In Wright Prospecting, the court applied several judicial tests to assess the scope of confidentiality. One such test was the “necessity test,” which is often used to weigh the need for confidentiality against the public interest in open justice. This test has its roots in the case of Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10, where the court held that the efficacy of private arbitration could be compromised if proceedings were made public. Another judicial test is the “reasonable purpose test,” which allows for the disclosure of confidential information if it is necessary for the establishment or protection of a party’s legal rights in relation to a third party. This test was highlighted in the context of s 27F(5) of the Commercial Arbitration Act, a provision that was also considered in Wright Prospecting. Caselaw Shaping Confidentiality: The Interplay with Wright Prospecting The Wright Prospecting case does not exist in a vacuum; it is part of a rich tapestry of jurisprudence on the subject of arbitration confidentiality. In EBJ21 v EBO21, the court summarized the uniform confidentiality provisions of commercial arbitration legislation, emphasizing the importance of confidentiality but also noting that parties could opt out. In R v Legal Aid Board; Ex parte Kaim Todner [1998] EWCA Civ 958; [1999] QB 966, the court emphasized that the parties’ agreement on confidentiality was not determinative, thereby preserving the court’s supervisory role. This principle was also evident in Wright Prospecting, where the court had to consider whether the orders sought were in the public interest. The Public Interest Conundrum: Lessons from Wright Prospecting The Wright Prospecting case serves as a poignant reminder that while the principle of confidentiality is generally upheld, there are instances where the public interest in the administration of justice may necessitate a departure from this norm. The principle of open justice was a significant consideration in the court’s decision, echoing sentiments expressed in Scott v Scott, where the House of Lords held that the court had no power to hear a suit in camera solely based on the parties’ agreement. Conclusion The case of Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd serves as a crucial touchstone in the ongoing debate about the scope and limitations of confidentiality in arbitration proceedings. While the court upheld the general principle of confidentiality, it also made it clear that this is not an absolute right and must be balanced against other considerations, such as the public interest in open justice. This nuanced approach is consistent with earlier caselaw and provides valuable insights for parties considering arbitration as a dispute resolution mechanism.

Supreme Court of British Columbia Weighs In: Arbitrator Discretion in Evidence Review

  Introduction In a recent judgment issued on 28 August 2023, the Supreme Court of British Columbia in the case of Ball v Bedwell Bay Construction Ltd. has provided invaluable insights into the complex interplay between procedural fairness and substantive review in arbitration proceedings. This article aims to dissect these critical elements by closely examining this landmark ruling. Drawing upon key passages and principles outlined in the judgment, we will explore the tests and criteria that both arbitrators and courts employ to ensure procedural fairness and conduct substantive review. This novel discussion serves as a comprehensive guide to understanding the current legal landscape of arbitration in Canada, particularly in light of the court’s nuanced approach to the arbitrator’s discretion in evidence review. Procedural Fairness in Arbitration Arbitrators are tasked with ensuring a fair process. As stated in “Ball v Bedwell Bay,” the arbitrator took “exceptional care to ensure the proceedings before him were fair” by setting clear deadlines for evidence submission and extending the hearing time from one hour to four hours (Ball v Bedwell Bay Construction Ltd., 2023 BCSC 1470, paras. 32-34). Courts employ specific criteria for evaluating procedural fairness. In “Ganitano v. Yeung,” the court noted that procedural fairness requires that reasons “allow the parties to know why, how, and on what evidence a decision-maker reached his or her decision” (Ganitano v. Yeung, 2016 BCSC 2227, para. 35). Substantive Review in Arbitration Arbitrators are responsible for making decisions that are substantively sound. They must consider the facts and apply the relevant laws. In “Speckling v. British Columbia,” the court stated that it may intervene only if the arbitrator’s findings are “openly, clearly, evidently unreasonable” (Speckling v. British Columbia (Workers’ Compensation Board), 2005 BCCA 80, para. 39). The focus is not on re-weighing the evidence but on assessing whether the conclusions are supported by the facts and the law. “Simply put, a decision-maker is not required to address every piece of evidence or to make findings on every element or claim put before them” as noted in “Ball v Bedwell Bay” (Ball v Bedwell Bay Construction Ltd., 2023 BCSC 1470, para. 36). This principle is rooted in the understanding that arbitrators are best positioned to determine what evidence is most pertinent to the case at hand. Distinguishing Between Procedural Fairness and Substantive Review While procedural fairness focuses on the manner in which the arbitration was conducted, substantive review is concerned with the correctness of the decision. Courts are generally more willing to intervene on grounds of procedural unfairness than substantive errors, given the deference accorded to the arbitrator’s expertise. The arbitration process is a delicate balance of procedural fairness and substantive review, each with its own set of tests and criteria. Courts serve as the guardians of this process, ensuring that it adheres to the principles of justice and equity. While the tests for procedural fairness and substantive review may evolve, the core principles remain constant: a commitment to a fair process and a just outcome. The Role of Guidelines and Statutory Provisions Arbitrators often rely on guidelines and statutory provisions to navigate the complex terrain of procedural fairness and substantive review. For instance, the MHPTA served as a crucial framework in the “Ball v Bedwell Bay” case, providing the arbitrator with criteria for evaluating tenancy agreements1. Courts also use these guidelines as a benchmark for their own review. In “Ball v Bedwell Bay,” the court found the arbitrator’s interpretation of the MHPTA to be reasonable, stating that the definition of a tenancy agreement “clearly captures the connection between an individual and a specific site” (Ball v Bedwell Bay Construction Ltd., 2023 BCSC 1470, para. 42). The Arbitrator’s Discretion: A Balancing Act Arbitrators must weigh various factors to arrive at a decision that is both procedurally fair and substantively sound. In “Ball v Bedwell Bay,” the arbitrator considered factors such as the nature of the home, the type of rent, and the park rules, among others (Ball v Bedwell Bay Construction Ltd., 2023 BCSC 1470, paras. 46-52). The court found this weighing of factors to be reasonable, stating that the arbitrator reached his conclusion “on a principled, well-reasoned basis” (Ball v Bedwell Bay Construction Ltd., 2023 BCSC 1470, para. 54). The arbitration process is a symbiotic relationship between procedural fairness and substantive review. Arbitrators are tasked with the challenging role of balancing these elements, and courts serve as the final arbiters, ensuring that the principles of justice and equity are upheld. In conclusion, the arbitration process is a complex but necessary mechanism for resolving disputes outside the traditional court system. It relies on a delicate balance of procedural fairness and substantive review, guided by established tests and criteria. While arbitrators have the discretion to focus on the most relevant evidence, this discretion is not unlimited and is subject to judicial review to ensure that it is exercised in a manner that is both fair and legally sound. This comprehensive analysis underscores the intricate balance that must be maintained to ensure a fair and equitable arbitration process. It also highlights the critical role of judicial oversight in preserving the integrity of this alternative dispute-resolution mechanism.

UAE Judgment on Creditors Claiming Tax Penalties from Debtors

  Wasel & Wasel has represented clients in over two hundred tax dispute procedures in the United Arab Emirates, gaining valuable experience in protecting taxpayers from tax penalties. The tax consequences arising out of deficient payments by debtors in commercial transactions has consistently grown more important as more taxpayers face tax penalties. A recent Dubai judgment introduces a novel perspective to this dynamic. This judgment, which potentially empowers creditors to claim tax penalties from their debtors, represents a significant shift in the commercial and tax law landscape. This development is particularly noteworthy given the evolving tax regime in the UAE, underscoring its potential implications for future commercial interactions. Liquidity Shortfall and Tax Penalties: The Age-Old Dilemma When creditors issue invoices, they anticipate timely payment. However, delays in these payments can lead to a liquidity shortfall, preventing the creditor from meeting their tax obligations. This can result in penalties from the Federal Tax Authority (FTA). These penalties, often substantial, further strain the creditor’s finances, essentially penalizing them for the debtor’s delay. The New Test Established by the Judgment The recent judgment has introduced a potentially groundbreaking test for creditors. The creditor was subject to tax penalties imposed by the FTA and claimed those tax penalties from the debtor. The three-member tribunal addressed the claim over the tax penalties as follows: “Regarding the request for the value added tax penalty, the plaintiff demands that the defendant be obligated to pay the VAT penalty…and whatever accrues until the date of paying the VAT. Given that the plaintiff did not provide evidence of paying the value of this penalty to the Federal Tax Authority, he cannot claim its payment from the defendant.” This implies that if a creditor can provide evidence of having paid the respective tax penalty, they might be able to claim it from the debtor. This test, while seemingly straightforward, could have profound implications for commercial transactions, especially when considering the broader context of the UAE’s evolving tax landscape. Understanding the Scope of Damages  The Civil Transactions Law recognizes both direct and indirect damages. If a particular head of damage encompasses both direct and indirect elements, the direct aspect takes precedence. Nevertheless, this does not preclude the possibility of claiming other heads of damages that are indirect alongside those that are direct. The distinction between direct and indirect damages is further clarified in Articles 283 and 284 of the Civil Transactions Law. Direct damages necessitate a guarantee without any conditions. In contrast, indirect damages require an offence, intent, or an action that leads to harm. If both direct and indirect causes coexist, the ruling leans towards the direct cause. Given this legal framework, it is evident that creditors have a viable avenue to claim tax penalties from their debtors. If a debtor’s delay in payment (the act) leads to a creditor facing tax penalties (the damage), and there is a clear causal relationship between the delay and the penalties, the debtor could be held responsible. UAE Federal Decree-Law No. 47 of 2022: Implications for Companies and Their Debtors The introduction of the UAE Federal Decree-Law No. 47 of 2022 on the taxation of corporations and businesses marks a significant shift in the UAE’s tax regime. With corporations now having to pay taxes on their profits, the financial landscape for businesses has undeniably changed. In this new environment, the judgment’s potential to allow creditors to claim tax penalties from their debtors becomes even more relevant. Companies, now burdened with tax obligations on their profits, might face penalties due to liquidity issues arising from delayed payments by debtors. This judgment provides them with a potential avenue to recoup these penalties. In essence, companies can utilize this legal avenue to ensure that they are not doubly penalized – first by the delay in payments from debtors and subsequently by the tax penalties arising from the new corporate income tax law. This development not only provides a safety net for businesses navigating the new tax regime but also serves as a deterrent for debtors, emphasizing the importance of timely payments in the broader context of the country’s tax obligations. Flexibility of Courts and Evidence Consideration The judgment’s statement, ” Given that the plaintiff did not provide evidence of paying the value of this penalty to the Federal Tax Authority, he cannot claim its payment from the defendant,” opens the door to a broader discussion on evidence. While evidence of payment is a clear route to claiming penalties, the courts’ flexibility in considering other forms of evidence is crucial. For instance, would enforcement actions by the FTA, despite the liquidity of the creditor, be sufficient evidence? This could be particularly relevant in cases where the creditor has made arrangements with the FTA or is contesting the penalty. Other forms of evidence might include communication with the FTA regarding the penalty, documentation of the liquidity shortfall directly resulting from the debtor’s delay, or even evidence of the debtor acknowledging their role in the creditor’s financial strain. Such flexibility would be in line with the pragmatic approach by the UAE courts, focusing on the real-world implications and fairness of the law, rather than a rigid adherence to form. Pragmatic Implications and the Way Forward From a pragmatic standpoint, this judgment, especially when viewed in the context of the UAE’s new tax law, could be transformative for creditors. It offers a potential remedy against the financial strain of delayed payments and the new tax obligations. Moreover, the potential flexibility of the courts in considering varying evidence further strengthens the creditor’s position. However, this potential remedy is not without challenges. Debtors could contest the validity of claims, and the exact nature and type of evidence accepted will likely be refined over time through subsequent judgments. Conclusion This judgment represents a significant development in the commercial and tax law landscape of the UAE. As the country’s tax regime evolves, this judgment offers a potential safety net for businesses, ensuring they are not unduly penalized due to the actions of their

Disputes on Delayed Approvals in Construction: An Analysis of Dubai Court Judgments

  In the intricate tapestry of construction law within the United Arab Emirates (UAE), delays related to approvals have emerged as a recurring theme in disputes. The courts’ approach to these matters is both nuanced and pragmatic, reflecting a deep understanding of the complex realities of construction projects. This article will dissect three key judgments from the Dubai Courts, each shedding light on the stance of the judiciary on delays arising from construction-related approvals. Judgment 1: Case No. 673 of 2021, Court of Cassation (Dubai) The case involves a maritime construction project. The developer’s failure to obtain necessary approvals, licenses, and permits led to significant delays, resulting in the purchaser’s request for contract termination. Court’s Findings and Reasoning Contractual Obligations and Delayed Approvals: The court found that the developer’s delay in obtaining necessary approvals was not excusable. The developer was expected to study the project’s requirements and obtain all necessary approvals before commencing the project. The delay of over three years was deemed a breach of contractual obligations. Rejection of Force Majeure: The court rejected the developer’s claim of force majeure, reasoning that the delay in obtaining approvals did not constitute an unforeseeable event. The court emphasized that the delay was within the developer’s control and did not render performance impossible. Expert Evidence and Site Inspection: The court relied on an expert committee’s report and site inspection, which revealed that the construction was incomplete and did not meet the agreed specifications. The court found this evidence sufficient to form its belief in the developer’s failure to perform. Interest Rate Adjustment: The court reduced the interest rate from 9% to 5%, balancing the developer’s breach and the purchaser’s legitimate expectations. Relation to Disputes Arising from Approval Delays The judgment offers significant insights into how courts may approach disputes arising from approval delays in construction projects: Pre-Contractual Planning: The judgment emphasizes the importance of thorough planning and understanding of regulatory requirements before entering into a contract. Clear Contractual Terms: The case underscores the need for clear contractual terms addressing potential delays and unforeseen challenges, including approval delays. Judicial Discretion and Evidence Evaluation: The judgment illustrates the court’s discretion in evaluating evidence and understanding the factual matrix, particularly concerning delayed approvals. Judgment 2: Case No. 105 of 2013, Court of Cassation (Dubai) The dispute at hand revolves around a construction project that suffered significant delays. The developer (the appellant) alleged that the delays were caused by factors beyond its control, including changes made by the principal developer and governmental inaction. The buyer (the respondent), on the other hand, contended that the developer’s negligence and failure to meet its fundamental obligations led to the delays. The Court’s Reasoning The Developer’s Obligations: The court embarked on a detailed analysis of the developer’s obligations under the contract and the relevant statutory provisions. It emphasized that the developer’s commitment was not confined to the explicit terms of the contract but extended to all that was necessary for the proper execution of the project, including obtaining necessary approvals and ensuring the readiness of the land. The Developer’s Conduct: The court scrutinized the developer’s conduct, finding no credible evidence to support the claim that the delays were beyond its control. The absence of documents proving governmental interference or changes by the principal developer led the court to conclude that the developer was either negligent or in default of its obligations. The Buyer’s Rights: The court also considered the buyer’s rights under the law, recognizing that the buyer was entitled to withhold payment if the developer failed to fulfill its corresponding obligations. The court’s reasoning was grounded in the principles of good faith and reciprocity that underpin contract law. Analysis and Implications The Importance of Documentation: This judgment underscores the critical importance of proper documentation in construction disputes. The developer’s failure to provide evidence of external factors leading to delays proved fatal to its case. Parties must be diligent in maintaining records that can substantiate their claims, particularly when alleging circumstances beyond their control. The Interplay between Contractual and Statutory Obligations: The court’s interpretation of the developer’s obligations illustrates the complex interplay between contractual terms and statutory provisions. It serves as a reminder that parties must be mindful of not only the express terms of their agreements but also the broader legal framework within which they operate. The Broader Context of Construction Disputes: The judgment also sheds light on the broader context of construction disputes arising from approval delays. It highlights the multifaceted nature of such disputes, encompassing not only legal and contractual issues but also practical considerations such as project readiness, governmental actions, and the conduct of various stakeholders. Judgment 3: Case No. 161 of 2011, Court of Cassation (Dubai) The dispute arose between a contractor and a property owner. The contractor, having completed a significant portion of the construction, alleged breaches due to delayed approvals, which they claimed led to increased costs and project delays. The owner, on the other hand, attributed the project’s delays to the contractor’s actions, particularly their cessation of work pending increased prices. Delayed Approvals: The Heart of the Dispute Cancellation of Annex and Modified License: The court’s analysis delved deep into the impact of delayed approvals. Specifically, it examined the contractor’s claim that the cancellation of parts of the work, such as a service annex, required a halt in work pending a modified license. The court found that such cancellations did not necessarily warrant a work stoppage. Impact on Timelines: The court juxtaposed the actual project delays against the contractual timelines. It underscored the contractor’s refusal to continue work without price hikes as a breach of contract. Yet, it also acknowledged the role of delayed approvals in extending the project’s duration. Increased Costs: The court recognized that delayed approvals, combined with the contractor’s cessation of work, led to escalated costs for completing the remaining work. Damages were awarded, reflecting the multifaceted repercussions of delayed approvals. The Court’s Reasoning The court’s approach was marked by a meticulous examination of the contractual obligations, the parties’ conduct, and

UAE judgments and tax committee decisions on FTA reconsideration procedures

  Wasel & Wasel has represented clients in over two hundred tax dispute procedures in the United Arab Emirates, gaining valuable experience in protecting taxpayers from significant losses over small procedural errors. From the start of a dispute at the reconsideration stage to the final trial at the Federal Supreme Court, the issues extend beyond taxes and penalties. They fundamentally focus on whether procedures have been followed correctly. This focus has been clear in numerous Federal court judgments and tax dispute resolution committee decisions since 2018. As a tax dispute moves through the court system, procedural integrity becomes increasingly scrutinized. The Federal Tax Authority’s litigation team is held as one of the UAE’s most skilled government litigation departments. Therefore, it is crucial to have counsel who are experts in the specific challenges of litigating Federal Tax Authority decisions. This article outlines key procedural judgments from the Federal courts and committees, providing insights for taxpayers on risk assessments and mitigation of taxes and penalties. Part I: Evidencing the Reconsideration Procedure Procedural Requirement The reconsideration procedure necessitates the submission of evidence to establish that the objector has filed a request for reconsideration in accordance with the law. Position of the Courts or Committees The Dubai Tax Dispute Resolution Committee no. 100/2021 emphasized the importance of evidence in the reconsideration procedure: “The evidence was devoid of anything that benefits establishing that the objector had filed a request for reconsideration, in accordance with the procedure set by law until the objection is considered by this committee, which makes the objection request submitted to the committee non-compliant procedurally.” Legislative Impact The Federal Decree-Law No. 28 of 2022 sets the legal framework for the reconsideration procedure, outlining the specific requirements for submitting evidence. Takeaway/Guidance The importance of evidence in the reconsideration procedure cannot be overstated. Taxpayers must ensure that all necessary documentation is included in the reconsideration request to establish compliance with the law. Part II: Scope of the Tax Dispute Procedural Requirement The scope of the tax dispute must be clearly defined and confined to the specific issues at hand. Position of the Courts or Committees The Supreme Federal Court, in cases no. 327/2021, 220/2021, and 181/2021, provided guidance on the scope of the tax dispute: “What the appellant raised regarding the legality of the tax imposition’s origin does not detract from that, as the scope of the relevant lawsuit does not relate to the extent of the legality of the tax imposition basically but its scope is limited to challenging the committee’s decision to cancel the delay penalty in payment, which does not allow exceeding that to reasons that were not a place for the relevant dispute from the beginning.” Legislative Impact The Federal Decree-Law No. 28 of 2022 does not explicitly define the scope of the tax dispute, leaving it to the courts to interpret and apply the law in this regard. Takeaway/Guidance Understanding the specific nature of the dispute and aligning legal arguments accordingly is essential. The scope of the dispute must be confined to the original issues, and overreaching must be avoided. In contrast, before a reconsideration request is filed, the taxpayer must ensure that the underlying decision obtained from the FTA encompasses all the items the taxpayer wishes to dispute. Part III: Discretion in Accepting Late Reconsideration Requests Procedural Requirement The reconsideration procedure allows for the possibility of accepting late requests, provided there are valid reasons for the delay. Position of the Courts or Committees The Emirati judiciary, in Federal Primary Court case no. 424/2019 and 438/2019, considered the discretion in accepting late reconsideration requests: “It is settled that the deadlines for appealing administrative decisions before the general appeal committees are characterized as regulatory deadlines intended for reconsideration of the administrative decision within specific deadlines without keeping them open without a controller for the stability of situations and legal positions. It means that the matter is left to the discretion of the administration in estimating the reasons for the excuse submitted for non-compliance with the deadline or the period specified by law, so if the applicant for reconsideration exceeds this specified period with an excuse accepted by the body, it has to override its will for these dates and address the reconsideration request. Saying otherwise makes the deadline set by the law non-existent, and the deadlines become open without a controller, which leads to instability of situations and legal positions that require the nature of tax laws and legislations due to the financial and economic effects on both parties, the state, and the tax funder. And the appellant company did not provide any reasons for not submitting its reconsideration request to the Federal Tax Authority within the specified period as stipulated in Article 27 of Law No. 7 on Taxes, and therefore the Authority rejected the request or did not accept it, its decision coincides with the correct law and what the tax legislator wanted.” Legislative Impact The Tax Procedures Law No. 7/2017, before being replaced with Decree-Law No. 28/2022, provided the legal basis for this discretion, allowing the administrative body to assess the reasons for non-compliance with stipulated deadlines. Takeaway/Guidance The discretion in accepting late reconsideration requests emphasizes the importance of providing valid reasons for any delay. Taxpayers must be aware of this flexibility but should not rely on it without substantial justification. Part IV: Issuance of a Reconsideration Decision After the Absence Thereof Procedural Requirement In the absence of a decision on a reconsideration request within the stipulated period, the administrative authority may still issue a decision, triggering a new period for recourse to the Tax Disputes Resolution Committee. Position of the Courts or Committees The Federal Supreme Court, in case no. 568/2022, provided guidance on this matter: “As long as this deadline is among the regulatory deadlines, if a person submitted a reconsideration request and the request was not decided within the stipulated period, and he did not resort to the Tax Disputes Resolution Committee after the period specified to decide on his request had passed,

Legal Risk for Australian Businesses in Cross-Border Transactions

  In the intricate matrix of cross-border legal risks, Australian enterprises are met with the most acute and perturbing challenges when they encounter situations such as insolvency, litigation, or arbitration with an international facet. However, these situations represent but a minute fraction of the total scenarios. A minuscule number of disputes possess the fortitude to bear the substantial costs and complexities linked with cross-border litigation or arbitration. It is of note that a significant portion of the bankruptcies and insolvencies befalling the cross-border spectrum predominantly involve small-scale businesses. This is despite the fact that larger enterprises tend to be the predominant actors in the cross-border domain. The harsh realities and hardships of cross-border legal troubles disproportionately impact these smaller businesses, a factor that must not be overlooked when addressing such risks. Given these conditions, civil remedies, which were once considered a feasible commercial option, increasingly prove to be unrealistic. The practical challenges presented by cross-border litigation have resulted in a situation where these remedies are more of an exception than a rule. The extant mechanisms devised to tackle such complex cross-border issues exhibit an erratic and limited scope. The sporadic nature and limited efficacy of these mechanisms point towards an urgent need for a comprehensive solution. This deficiency underscores the importance of developing a robust, systematic, and consistent framework that can aid Australian businesses in effectively managing cross-border legal risks and uncertainties, a task which is undeniably significant in today’s globalised economic landscape. Navigating cross-border legal risk The navigation of cross-border legal risk is a delicate exercise, requiring careful consideration of a range of strategic options. These strategies often involve nuanced risk management processes tailored to the unique circumstances and risks involved. Consider an exporter: to circumvent the risk of a buyer’s default, the exporter might transfer payment risk to its bank through the use of documentary credits. This financial instrument effectively shifts the responsibility of payment to a bank, which guarantees payment as long as the exporter meets certain agreed conditions. The intricate mechanics of these instruments offer a form of insurance to the exporter, who is then able to conduct international business with lessened financial anxiety. Similarly, joint venture arrangements may necessitate an entirely different approach. Here, a carefully crafted agreement could dictate the apportionment of distinct legal risks among the participants. For instance, one joint venture partner might assume the regulatory risks associated with a particular jurisdiction, while the other takes on the operational risks. These contractual understandings provide a foundation for the distribution of liability, allowing each party to focus on its areas of strength and expertise. The method of foreign law impact mitigation, or “quarantining” of risk, involves designing the company structure in such a way that risk is contained within a particular subsidiary. By segregating business units or processes that are exposed to high levels of foreign legal risk, the company can effectively limit the potential exposure of its overall operations to any detrimental legal consequences. This approach allows a firm to participate in potentially high-risk ventures without exposing the entire organization to these risks, in effect insulating the parent company and its other subsidiaries. Yet another approach is the pricing of risk, where firms integrate the increased risk into their fees or returns. By doing so, companies essentially pass on the cost of risk management to consumers or partners. This strategy involves the careful analysis of risk profiles and potential financial impacts, balancing them against potential profits, and adjusting prices or returns accordingly. This nuanced dance requires not just a keen understanding of the legal risks involved but also astute business acumen to avoid pricing oneself out of the market. At times, a firm may decide to accept the risk without seeking any form of recompense or protection. This is typically a calculated business decision, often made when the potential benefits far outweigh the potential losses, or when the costs of risk management strategies exceed the potential risks. This bold move requires a deep understanding of the legal landscape and potential impacts, as well as a willingness to face potentially significant consequences should the risks materialise. Assessing cross-border legal risk The assessment of cross-border legal risk, especially within a commercial setting, is frequently grounded in overarching beliefs and assumptions about a foreign country’s legal system. The process often involves more of a reliance on heuristic understanding of a foreign legal landscape than on detailed, comprehensive analysis. Occasionally, this reliance on generalized understanding can inflate fears and lead to overestimation of risks. This emphasizes the need for a balanced approach, blending the heuristic understanding with detailed, specific analysis to avoid overcompensation for perceived risks. The complexity of cross-border legal risk management is further amplified when one considers the fact that the issues faced by Australian firms differ significantly depending on the countries and industries involved. Legal systems, regulatory environments, and business cultures vary widely from country to country, and what may be a significant risk in one country might be insignificant in another. Therefore, a more nuanced approach, which takes into account these variations, is necessary. To this end, a country-by-country risk assessment approach is often appropriate. Such an approach involves identifying unique risks for each country within which Australian firms operate, and for each industry within those countries. This level of granularity enables a more targeted and effective risk management strategy, allowing firms to not only understand the risk landscape better but also develop more effective, tailored risk management strategies. Moreover, the risk profile of an industry can vary widely from one country to another. Factors such as local regulations, cultural attitudes, and economic conditions can impact how businesses in a particular industry operate, and therefore the risks they face. Therefore, not only is it necessary to consider the risk landscape on a country-by-country basis, but also within the specific industry context within each country. By adopting such a multifaceted approach to cross-border legal risk management, Australian firms can enhance their capacity to navigate this complex landscape. This not only safeguards their

Dubai Judgments on Extension of Time Claims: Repair and Additional Works, Concurrent Delay, and Contractual Wording

  In the construction and engineering sector, extension of time claims (EoTs) are ubiquitous, often representing complex contractual and legal implications. Amid the evolving international perspectives on these claims, the United Arab Emirates (UAE) has carved out its distinct path, driven by a pragmatic and robust legal framework. A deep dive into the UAE’s legal ethos towards EoT claims reveals rich insights, hinged on a series of landmark court judgments. To capture this perspective, we turn to three pivotal rulings: Dubai Cassation Court case no. 389/2022 issued on 19 September 2022. Dubai Cassation Court case no. 161/2021 issued on 11 April 2021. Dubai Cassation Court case no. 348/2015 issued on 22 May 2016. 1. EoT in Repair Works: Dubai Cassation Court case no. 389/2022 In this case, the appellant claimed that the defendant had failed to adhere to the agreed upon project timeline, leading to significant delays. Further, the appellant alleged that the work done was flawed, requiring deconstruction and reassembly. The case turned on the question of whether the delays were permissible under the contract, and whether the repairs could be considered a breach of the same. Crucially, the expert’s report, addressing the appellant’s objections, concluded that modifications made to the architectural and structural works, boundary wall modifications, general modifications, and sanitary drainage modifications—totaling eight core works—required additional time beyond the original project timeline for completion. In other words, the delay was necessary, and not a result of any failure on the part of the contractor. One must observe that time extension claims often arise from the unforeseen complexities that are integral to any construction project. Contractors can be confronted with a variety of challenges beyond their control. Here, the nature and magnitude of the required modifications justified the delay. The consultant agreed to extend the project deadline based on a letter issued in response to the plaintiff’s request. Consequently, any delay could not be blamed on the contractor. The contractor rectified the flawed works, and the repairs were approved by the consultant. Therefore, as per the court, the appeal lacked a solid basis and was therefore dismissed. The Dubai Cassation Court’s ruling in case no. 389/2022 highlights the complex nature of time extension claims in construction contracts. It underscores the importance of considering project-specific circumstances, the necessity of repairs, and agreed-upon contract terms while dealing with such issues. Through this lens, the court’s ruling offers a logical, well-argued, and reasoned response to such claims, proving instrumental for arbitration in similar cases in the future. 2. EoT in Additional Works and Concurrent Delay: Dubai Cassation Court case no. 161/2021 In the Dubai Cassation Court case No. 161/2021, the Court made a seminal ruling on EoT claims, throwing into sharp relief the fine line between the rights and obligations of contractual parties. The Court’s ruling navigates the muddled waters of concurrent delay and additional work – both being principal triggers of EoT claims. Essentially, it ruled that a contractor could claim an EoT in instances of concurrent delay, provided the owner’s delay activities are simultaneous with those of the contractor. Simultaneity here denotes that the owner’s actions (or inaction) must be within the same period as the contractor’s delay-causing activities. Moreover, the ruling underscores the essentiality of establishing causation – the delay must directly spring from the owner’s actions. The Court also delineated on the question of additional work causing delay. It observed that when additional work requiring extra time is commissioned, it becomes imperative to grant an EoT to the contractor. This not only maintains the contractual balance but also upholds the fundamental principle of fairness. The judgement makes it clear that an owner cannot take refuge in the delay penalties clause if the contractor’s delay in execution arises from causes attributable to the owner. The critical aspect of this case, though, lies in the unfurling of the connection between EoT claims and performance bonds. The Court postulated that a contractor’s entitlement to return of performance bonds is intricately linked to its adherence to contract completion timescales – extended or not. In situations where the contractor has dutifully executed its obligations and delays are not its sole fault, it is entitled to the return of the bonds, as they have fulfilled their purpose. Moreover, the Court also shed light on the role of a project consultant, highlighting that the certificates issued by the consultant, attesting the progress of work, are consequential for the contractor’s payment claims. In this context, it was emphasized that allegations of collusion between the consultant and the contractor must be substantially proven. The ruling elucidates that in the adjudication of EoT claims, every aspect of the case is scrutinized – from the causation of delays to the extent of their impact on the project timeline. It reiterates the importance of thorough examination and comprehensive understanding of the project specifics, as well as the nuances of the EoT claim itself. The Court’s decision in case No. 161/2021 indeed serves as a comprehensive guide for stakeholders in construction contracts. It lucidly explicates the concept and ramifications of EoT claims, helping parties navigate this intricate facet of contract law. This case, thus, is a welcome addition to the compendium of legal guidance available for understanding EoT claims, a complex, yet pivotal element of construction contract disputes. 3. Elucidating Contractual Clarity: Dubai Cassation Court case no. 348/2015 The contractor sought compensation for additional costs arising from an extended period of project execution. The employer argued that the contract contained no provision allowing the contractor to claim any costs related to the EoT. The case turned upon the interpretation of Articles 199 and 207 of the UAE Civil Transactions Law, which emphasize the significance of a valid cause and subject matter for a contractual obligation to be legally enforceable. The Court, applying these provisions, found that the contractor’s claim for additional costs lacked a legitimate contractual or legal basis since there was no provision in the contract allowing such a claim. The EoT claim was purely for additional time

Actual Acceleration and Constructive Acceleration in Canadian Construction Claims

  When one treads the intricate path of construction claims, a keen understanding of concepts such as ‘actual acceleration’ and ‘constructive acceleration’ becomes crucial. While these terms may appear to be mere technical jargon at first glance, they in fact encapsulate distinct scenarios that arise from deviations in schedule and unforeseen delays, which can profoundly impact the complex machinery of a construction project. A construction contract, much like an orchestra, requires all its elements to work harmoniously towards the culmination of a performance—in this case, the successful completion of a project. An irregularity or delay can disrupt this harmony, necessitating adjustments or, in our terms of interest, ‘acceleration’. The principles of ‘actual’ and ‘constructive’ acceleration are not only elucidated in textbooks or legal dictionaries but have also been tested and refined in the crucible of the courtroom. One such illuminating case that explicates these concepts in the Canadian legal milieu is the 2002 British Columbia Supreme Court (BCSC) case, Golden Hill Ventures Ltd. v. Kemess Mines Inc. Actual Acceleration: An Examination and its Implications In the construction world, ‘actual acceleration’ describes an environment where the project owner, in response to unforeseen and excusable delays, directs the contractor to hasten the pace of work, with the aim of completing the project before the extended deadline. As the term ‘actual’ suggests, this acceleration arises from a concrete instruction by the owner, making it a tangible aspect of project management. The BCSC decision in Golden Hill Ventures Ltd. v. Kemess Mines Inc. succinctly summarizes this concept. However, to truly grasp the implications and nuances of ‘actual acceleration’, one must delve into the precedents from which it emerged. A particularly informative case in this regard is Morrison-Knudsen Company v. British Columbia Hydro & Power Authority, in which the concept of ‘acceleration’ was elaborated by Justice Macdonald. He defined acceleration in a construction contract as the act of ‘speeding up the work’ or ‘increasing the rate of performance’ to surmount the challenges of delays and to ensure the work is completed within the stipulated contract dates. In this expansive understanding, actual acceleration isn’t just a one-dimensional response to delays; it covers a spectrum of situations where delays can be attributed either to the contractor, the owner, or a combination of the two. It serves as a mechanism to foster equitable treatment of the parties involved. In instances where the delays are squarely within the owner’s sphere of responsibility, and despite these delays, the contractor is compelled to accelerate, the additional costs borne by the contractor become the owner’s liability. This principle of actual acceleration underscores the importance of fairness in contract execution and enshrines the idea that the financial burdens arising from owner-induced delays should not be shouldered by the contractor. The realm of actual acceleration, therefore, is not merely about catching up with lost time. It is about understanding the root causes of the delays, attributing responsibility appropriately, and ensuring that the eventual financial implications are justly addressed. It forms a cornerstone of construction contract management by emphasizing fair treatment and the sharing of risks and responsibilities between the contractor and the owner. Constructive Acceleration: An Explication and its Ramifications The concept of ‘constructive acceleration’ introduces an additional layer of complexity to our understanding of acceleration within construction contracts. The term ‘constructive’ implies a scenario where an acceleration is inferred rather than being explicitly ordered, illustrating the nuanced interplay between contract management and legal interpretation. In this vein, constructive acceleration is born out of circumstances where there has been an excusable delay which, for whatever reason, the owner refuses to accept, thus pressing for adherence to the original completion date. This may occur even when an extension to the project schedule could have been a reasonable and feasible solution. Consequently, the contractor is forced to operate within a compressed timeline, effectively ‘accelerating’ the work pace without explicit instructions to do so. This somewhat abstract concept is more easily understood through concrete legal precedents. A prominent case that serves to elucidate the essence of constructive acceleration is W.A. Stevenson Construction (Western) Ltd. v. Metro Canada Ltd. Here, the contractor was bound to the original milestone dates, despite facing a range of external challenges such as adverse weather conditions and a delay in the removal of buildings by the owner. In this context, the insistence of the owner on meeting the original deadline obligated the contractor to expend additional resources, leading to a clear-cut instance of constructive acceleration. The case illustrates that a strict adherence to original contract timelines, even in the face of external delays or hindrances, can inadvertently lead to a situation where the contractor is essentially running a race against time, striving to maintain pace with the project schedule. Here, the constructive acceleration becomes a byproduct of a rigid contract enforcement approach, which fails to account for the evolving dynamics of a construction project. In conclusion, constructive acceleration represents a delicate balancing act between contractual obligations and the practical realities of project execution. It showcases the need for flexibility and mutual understanding between the owner and the contractor, with an emphasis on accommodating unforeseen changes in project dynamics. Judicial Interpretation and Practical Implications The concepts of actual and constructive acceleration aren’t just theoretical constructs. They carry profound implications for project management, financial risk, and dispute resolution within the sphere of construction contracts. A meticulous analysis of judicial decisions is essential to discern the practical significance of these concepts. The principles derived from the cases of Morrison-Knudsen and W.A. Stevenson Construction underline the importance of equitable treatment and reasonable adjustment of timelines. In these cases, the owners imposed a rigid completion date despite their own delays, which under usual circumstances, would have warranted extensions for the contractors. As a result, the contractors had to apply more resources, such as equipment and personnel, to speed up project completion. The owners, therefore, were obliged to indemnify the contractors for these additional costs. Interestingly, the courts’ understanding of acceleration was not confined to the whole project

UAE Supreme Court: Fraud and deception in construction quantity schedules

  Introduction The United Arab Emirates Federal Supreme Court has offered an important perspective on the implications of fraud and deception in the context of construction contracts, based on a ruling that delved into these concepts. The ruling gives critical insights into how the court views contractual procedures, quantity schedules, and the necessary evidence to establish fraud and deception. Construction Contract Procedures In the contract in dispute, a critical element was the inclusion of all specifications and descriptions related to the beautification work, which was the responsibility of the contractor. The contract details served as a roadmap for the contractor, defining their responsibilities and obligations in executing the project. Quantity Schedules Integral to the contract is the quantity schedule, a document detailing the types and quantities of work to be completed as part of the project. It acts as a guiding tool that helps eliminate disagreements over the project’s scope. The court ruling stressed that any variance from this quantity schedule or any modifications in the design would be viewed as a change, signifying the owner’s awareness of the contractor’s prices and work items. However, the court also noted that the owner had the opportunity to seek better price offers than what had been agreed upon, implying a level of responsibility on the owner’s part in terms of due diligence before entering into the contract. Legislative Provisions and Interpretations The court based its decisions on relevant legislative provisions, namely Article 94 of the Civil Procedures Law and Article 21 of the Commercial Companies Law No. 2 of 2015. Article 94 of the Civil Procedures Law primarily addresses issues related to lawsuits and legal procedures. In the context of this case employed to analyze the eligibility of parties involved in the lawsuit, eventually leading to the determination that directing requests to the three individuals along with the contracting company was litigation against an ineligible party. On the other hand, Article 21 of the Commercial Companies Law No. 2 of 2015 offers guidance on the responsibilities and liabilities of shareholders in a company used to examine the roles and potential liabilities of the three defendants who were partners in the company initially sued. Court Requirements to Evidence Fraud and Deception When it comes to proving fraud and deception, the court requires solid evidence to establish such allegations. In this case, the court found no compelling evidence of the three defendants’ role in the contract under litigation, undermining the strength of the claim of fraud. The court reasoned that the owner failed to establish that the contractor used means to mask falsehood as truth and create a deceptive appearance, accompanied by physical manifestations that would affirm the deception. Simply being partners in the contractor company initially sued does not, in itself, provide sufficient proof of deception. Similarly, claims of overreaching in the contract, while possibly significant, were dismissed by the court. Variations to Quantity Schedule: Fraud and Deception? In the context of construction contracts, variations or changes to the quantity schedule can become potential points of contention. The quantity schedule, as part of the construction contract, specifies the type and quantity of work to be undertaken. It serves as a guiding document that assists in preventing disagreements over the scope of the project. The courts are likely to consider deviations from this agreed schedule as a substantial change, provided these deviations are not mutually agreed upon by the parties. In the ruling at hand, the court took a pragmatic view of such variations. It asserted that any divergence from the quantity schedule or modifications in the design constituted a change. However, this alone does not equate to fraud or deception. The court maintained that the property owner’s awareness of the prices, work items, and overall understanding of the contract terms plays a crucial role in deciding whether any changes amount to fraudulent activity. The fact that the owner had the possibility to seek more favorable price quotes than what had been agreed upon in the contract signaled that they were aware of the pricing dynamics. This indirectly implies that even if the contract resulted in less favorable terms for the owner, it cannot be directly classified as fraud or deception unless the contractor employed fraudulent means to mislead or deceive. If any changes to the quantity schedule are made with the intention to deceive, mislead, or defraud the other party, it can be classified as fraudulent behavior. This could include actions like the contractor artificially inflating quantities or the owner knowingly accepting lower quantities than required, with the intent to later claim additional costs. However, changes made in good faith, or with full transparency and mutual agreement, are generally considered legitimate variations to the contract. In the absence of strong evidence of fraudulent means, as in this case, variations to the quantity schedule are not typically regarded as fraud or deception. This highlights the importance of clear, honest communication, and comprehensive documentation in construction contracts, particularly when dealing with changes to the project’s scope as outlined in the quantity schedule. As a takeaway, both parties should be fully aware of their obligations and rights, exercise due diligence before entering the contract, and maintain transparency and clear communication throughout the project to avoid misunderstandings that could be construed as deception or fraud.

Adapting to Change: Key Insights for In-House Counsel from Veteran GC David Cosgrave

David Cosgrave, Of Counsel in Australia at the law firm Wasel & Wasel, is no stranger to navigating the complex and ever-evolving legal landscape. With years of experience serving as a General Counsel (GC), he understands the unique challenges and demands of the role. In a recent interview on The Corporate Counsel Show, Cosgrave shared his insights on hiring practices, risk management, and the role of in-house counsel in sensitive legal issues. In-House Counsel: The Evolution and the Art of Adaptability The role of in-house counsel has evolved significantly over the years, transforming from a strictly advisory role to an integral part of strategic business decision-making. This evolution calls for a new mindset, characterized by adaptability and a deep understanding of client motivations. Reflecting on the changes in the legal field, an expert, David Cosgrave, provides some illuminating insights. With an extensive career as a General Counsel and currently Of Counsel at Wasel & Wasel, Cosgrave highlights that in his experience, the key to effectiveness in an in-house counsel role lies in understanding the nuances of motivations that drive various actors within an organization. According to Cosgrave, the ability to truly comprehend the motivations of clients and stakeholders enables legal professionals to provide relevant and valuable advice. When discussing legal issues that are not part of the everyday legal spectrum, such understanding of human motivations becomes critical. The ability to balance the risk with client goals is a skill that is refined with such understanding. For example, consider a scenario where an athlete refuses to take a drug test. A legal professional, who has a grasp of the athlete’s motivations and goals, would be better equipped to provide counsel that balances legal requirements and the athlete’s interests. Moreover, this capability to adapt, to understand motivations, and to balance risks with goals is not something that is confined to dealing with exceptional situations. Cosgrave emphasizes that it is the key to delivering optimal legal advice in all situations, thus reinforcing the need for in-house counsel to develop these skills and apply them in their roles. Adaptability also implies a willingness to embrace the constant changes that are shaping the legal profession. In-house counsel roles today demand a heightened level of agility. This evolution can be largely attributed to the rise of technology, which has brought about new trends, developments, and challenges that are transforming the legal landscape. Understanding and adapting to these changes is not just crucial for survival; it’s also the key to leveraging the opportunities that come with these transformations. As Cosgrave articulates, the in-house counsel who manages to ride this wave of changes will have the upper hand in the new world of legal services. This adaptability may very well become the defining factor of success for in-house counsel in the years to come. The evolving role of in-house counsel, thus, underscores the importance of a holistic approach to legal advice—one that takes into account the motivations of clients, the balancing of risk with goals, and the willingness to embrace and adapt to change. Technological Transformations: Rising to the Challenge The proliferation of technology in every sector has necessitated a new level of adaptability and learning for in-house counsel. These professionals now need to grasp the fundamental working of emerging technologies to deliver optimal legal advice. David Cosgrave’s experience as the first external lawyer to the first internet service provider in Australia provides a fascinating lens to this reality. Having witnessed the internet’s transformative impact firsthand, Cosgrave shares that it is essential for legal professionals to keep abreast of technology’s fast pace, as it profoundly impacts the legal landscape. In addition to an understanding of the current technology, Cosgrave highlights the need for legal professionals to anticipate the impact of future technologies. For instance, the advent of large language models like GPT and its successors could further transform the legal profession. Not only can these AI models automate routine tasks, but they also raise new legal and ethical questions, thereby challenging the traditional roles and practices of lawyers. Yet, being tech-savvy is not about engaging in a never-ending arms race with emerging technologies. According to Cosgrave, it is more about understanding the basic principles of these technologies to navigate the legal challenges and opportunities they bring. This understanding allows legal professionals to strike a balance between leveraging technology and maintaining the human element in their work. Cosgrave draws attention to a critical point in the discussion around technology and the legal profession – the importance of maintaining an evergreen approach. This approach means focusing on perennial principles, those that remain relevant irrespective of the technological changes. These principles, such as understanding client motivations, balancing risk and goals, and embodying adaptability, have stood the test of time and will continue to guide in-house counsel amid technological upheaval. For example, as artificial intelligence becomes more integrated into legal processes, there may be ethical and legal considerations that challenge established norms. An evergreen approach would ensure that in-house counsel maintain professional ethics and provide sound, balanced legal advice, despite the transformative effects of technology. In-house counsel, thus, stand at the intersection of technology and traditional legal principles. The challenge and opportunity lie in embracing technology, understanding its impact, and adapting to the changes it brings, all while staying rooted in the evergreen principles of the legal profession. The Evolving Role of General Counsel and the Legal Technician As we continue to navigate through the rapid changes in technology, business environments, and societal norms, the roles of General Counsel (GC) and other legal professionals are also evolving. David Cosgrave suggests a shift from the traditional legal roles to a more goal-oriented approach to better serve clients. Cosgrave mentions a trend of decreasing tenures for GC roles, shorter than the average CEO. This trend might be attributed to various factors such as increasing demands of the role, rapid changes in the business environment, and the stresses of managing risk in uncertain times. To succeed in this ever-changing landscape, GCs must adapt to

Korean Investment in Canada: The Gateway to the U.S. EV Market

  Investing in Canada: A Strategic Move for Korean Companies Recent developments in international agreements and U.S. legislation present unique opportunities for Korean companies investing in Canada’s clean energy sector. The Memorandum of Understanding (MOU) between Canada and Korea announced in May 2023 has laid a firm foundation for Korean companies to establish secure and resilient supply chains in the critical minerals sector, which is central to clean energy technologies, including electric vehicles (EVs). Investing in Canada not only provides Korean companies with access to rich mineral resources but also allows them to navigate within a country known for its robust legal frameworks, political stability, and transparent business practices. Moreover, it places them at a vantage point to leverage the provisions of the U.S. Inflation Reduction Act (IRA) and the United States-Mexico-Canada Agreement (USMCA). Accessing the U.S. Market through USMCA The USMCA, a trilateral agreement between the United States, Mexico, and Canada, provides a seamless pathway for goods produced in Canada to enter the U.S. market. Through the implementation of USMCA, Korean companies investing in Canada can tap into the U.S. market, the world’s second-largest for EVs, without facing prohibitive trade barriers. This strategic positioning opens the gateway to a burgeoning EV market with the potential for exponential growth. Capitalizing on the U.S. Inflation Reduction Act The IRA is another substantial development favoring Korean companies in Canada. The act extends the EV tax credit of $7,500 through 2032 for eligible consumers, offering a major incentive for EV adoption. However, a critical aspect of this act revolves around the specifications for availing of the credit. Half of this credit—$3,750—is tied to vehicles with batteries manufactured or assembled in North America. By investing in battery manufacturing facilities in Canada, Korean companies can fulfill this stipulation and ensure that the EVs they contribute to will be eligible for this attractive tax credit. Further, the IRA demands an increase in the percentage of the value of components over time, starting with 50% in 2023 to 100% by 2029. Investing in Canadian manufacturing allows Korean companies to meet these increasing requirements, thereby ensuring their continuous eligibility for the tax credit. Riding the Wave of Clean Energy Transition The clean energy transition, strengthened by the Canada-Korea MOU and the U.S. Inflation Reduction Act, presents a golden opportunity for Korean companies. By investing in Canada, they can participate in a growing market, align their operations with the shift towards sustainability, and gain a strategic advantage in the expanding North American EV market. Crafting a Sustainable Supply Chain One of the significant benefits that the Canada-Korea MOU offers Korean companies is its emphasis on cooperation across critical mineral supply chains. Canada, blessed with an abundance of critical minerals essential for EV batteries, becomes an attractive destination for Korean battery manufacturers and suppliers. By setting up operations in Canada, Korean companies can secure a resilient supply chain that ensures a steady flow of these critical minerals. It not only aids in streamlining their operations but also contributes to sustainability goals by minimizing the environmental footprint associated with long-distance transportation of raw materials. Driving Innovation through Cooperation The MOU outlines areas of cooperation between Canada and Korea in trade, investment, and information exchange related to critical mineral processing and recycling. This means that Korean companies can gain access to innovative Canadian technologies and research in these areas, fostering a climate of mutual growth and learning. Collaborative ventures could spur the development of new, more efficient battery technologies, recycling methods, and advanced manufacturing practices. This shared knowledge can enhance competitiveness and accelerate the transition to cleaner energy sources. Making the Most of the North American Free Trade Zone The comprehensive provisions of USMCA make it a linchpin in the expansion strategy of Korean companies. USMCA has effectively created a massive free-trade zone in North America, opening new avenues for Korean businesses to enhance their market reach. By setting up manufacturing facilities in Canada, Korean companies can benefit from the USMCA provisions, ensuring seamless access to the American and Mexican markets. The geographical proximity to these markets could result in lower logistics costs and quicker response times, ultimately bolstering their competitiveness. Encouraging EV Adoption through Financial Incentives The IRA provisions offer substantial financial incentives for EV buyers, thereby encouraging widespread EV adoption. By manufacturing batteries in Canada, Korean companies can ensure their products qualify for these tax credits, making them more affordable and appealing to consumers. Furthermore, the IRA’s emphasis on locally sourced and manufactured components is set to spur demand for North American-made batteries. Korean companies with manufacturing units in Canada stand to gain immensely from this growing demand. Conclusion: A Future-Proof Investment Strategy By investing in Canada, Korean companies can strategically position themselves to benefit from the lucrative North American EV market, bolstered by supportive legislative frameworks and international agreements. In the grand scheme, it’s not merely an investment in a country; it’s an investment in a sustainable and prosperous future in the global clean energy sector. By harnessing these opportunities, Korean companies are poised to become leading players in the worldwide EV revolution, proving that smart, strategic investments can drive both economic growth and environmental sustainability.

Dubai Court finds Canadian company and its owner liable in USD 7M cryptocurrency dispute

  Background The plaintiff, a Canadian businessman, filed a suit before the Dubai Primary Court against the first defendant, an individual who owned the second defendant, a company established according to the laws of British Columbia, Canada. The company operated in the cryptocurrency market, facilitating the buying and selling of various currencies using fiat currencies such as Canadian and US dollars. In early 2018, the first defendant traveled from Canada to the United Arab Emirates and met the plaintiff at a hotel in Dubai. Following their discussion, an agreement was reached wherein the company owned by the plaintiff, would use the services of the Canadian company (second defendant) to facilitate electronic transfer payments. It was agreed that the second defendant would act as a third-party payment processor for both the plaintiff personally and his company for payments and wire transfers. As a part of the agreement, the plaintiff opened a trading account with the second defendant. The plaintiff would transfer Bitcoin or any other currency to the second defendant using his personal account. The terms and conditions allowed the plaintiff to cancel the account and withdraw all his balances at any time. By the end of 2018, the second defendant delayed several transfers and claimed to have sent electronic transfer confirmation forms to the plaintiff, but the plaintiff received none of these transfers. In early 2019, the plaintiff emailed the first defendant, pointing out the pending transfers that lacked tracking codes. He asked the first defendant to provide the tracking numbers for these transfers. The first defendant promised to send them to the plaintiff, but the plaintiff received neither the tracking numbers nor the transfers that the first defendant claimed to have sent. In mid-2019, the plaintiff attempted to withdraw his cryptocurrency assets from his account with the second defendant. However, the first and second defendants refused to hand over the cryptocurrency assets and wrongfully retained them. The value of the cryptocurrencies in the account of the plaintiff with the second defendant amounted to USD 6,782,459.96, representing the average price of the cryptocurrencies in said account during the period from February 2021 to March 2021 according to details in an expert report submitted by the plaintiff. Procedures The court deliberated the submissions and issued an interim order to appoint a financial expert to report on the technical submissions of the plaintiff. The court-appointed expert relied on details of the digital currency wallet of the plaintiff, extracted from the website of the Canadian company (the second defendant). The details contained the balance of the digital currencies and their value at the dates of transfer and claim proceedings. The total value of the digital currency balance as of the date of transfer to the second defendant was found to be USD 2,711,570.98 and as of the date of the preliminary court-appointed expert report was USD 7,460,838.38. Analysis The court found a definite relationship between the parties, evidenced by the email correspondence exchanged between the plaintiff and the first defendant. Furthermore, the cryptocurrency wallet details, obtained from the website of the Canadian company (second defendant), including the cryptocurrency balance and its value, played a crucial role in the proceedings. The court accepted the values of USD 2,711,570.98 and USD 7,460,838.38 as points for formulating the quantum of the amount claimed. The plaintiff had snapshots of his trading account with the second defendant, which confirmed the balance demanded in the lawsuit. As pointed out by the court-appointed expert in his report, this balance was owed to the plaintiff by both defendants, based on an email sent by the first defendant to the plaintiff in early 2019. This correspondence acknowledged the outstanding balance in the account of the plaintiff, including the existence of cryptocurrencies in the crypto wallet. Moreover, the plaintiff presented extracts from the accounting software used by both defendants, showing the balances of the crypto wallet belonging to the plaintiff and the deposited cryptocurrencies. The court found that this electronic correspondence and documents pointed to the liability of the first and second defendants for the crypto wallet belonging to the plaintiff. Disposition Based on these findings, the court deduced that the first defendant, as the owner of the second defendant, controlled the tracking numbers of the transfers and the cryptocurrencies in the crypto wallet of the plaintiff. The court found the first and second defendants jointly liable to pay the plaintiff an amount of USD 6,782,459.96 or its equivalent in Emirati Dirham, along with legal interest at an annual rate of 5% from the date of judgment until the full payment. Takeaway This recent judgment by the Dubai Primary Court marked a significant precedent, displaying the ability of the Dubai Courts to pierce the corporate veil of foreign companies, in this case, a Canadian company, holding its owner personally liable. This judgment highlights the universal reach of Dubai Courts, effectively adjudicating multi-jurisdictional disputes, irrespective of the place of incorporation or domicile of the entities involved. In this case, the decision by the Dubai Primary Court to hold the owner of the Canadian company personally responsible signifies a significant expansion of Court authority over international entities in cryptocurrency disputes, demonstrating the commitment by the Dubai Courts to ensuring justice and enforcing liability. This decision also highlights the acceptance of the Dubai Courts of sophisticated evidence regarding crypto transactions and crypto wallets. This development can be regarded as progressive in the rapidly evolving digital world of today. The reliance by the Court on digital currency balances, the examination of email correspondences, and data from accounting software indicate a keen understanding and acceptance of digital and cryptographic evidence. As the world continues to grapple with the legal implications and complications of cryptocurrencies, the judgment by the Dubai Courts represents a significant step towards developing an effective judicial framework that can handle cases involving international crypto transactions. The ruling sends a clear message that the Dubai Courts are capable of providing justice in cases involving cryptocurrencies, despite their inherent complexity and the international jurisdictional issues involved.

Abu Dhabi Court upholds out-of-scope award and indirect arbitration claims

  A recent case from the Abu Dhabi Cassation Court serves as an exemplary canvas on which several key arbitration concepts were explored, particularly concerning the validity and enforceability of an arbitration award that delves beyond the scope of its underlying arbitration agreement and the role of indirect claims in arbitration under the UAE Civil Transactions Law. Case The case revolved around a dispute arising from a contractual relationship involving the appellant – a contractor – and three respondents. The first respondent, on behalf of the other two, had previously filed a lawsuit against the appellant to enforce its rights per the UAE Civil Transactions Law’s Articles 392 and 393. These articles form a cornerstone of the UAE’s law regulating civil and commercial matters. Articles 392 and 393 of the Civil Transactions Law permit a creditor, even if their right is not due for performance, to exercise all the rights of the debtor, unless those rights are intimately linked to the debtor’s personality or non-attachable. A creditor is thus deemed to be representing their debtor in exercising these rights, and any benefit derived from such an exercise enters the debtor’s assets and becomes a guarantee for all the debtor’s debts. Decision The case’s focal point centered on the enforceability and validity of the arbitral award rendered in the ensuing arbitration proceedings. The appellant sought to nullify the arbitral award, primarily on the grounds that the arbitral tribunal had decided on matters not encompassed within the arbitration agreement. However, the Abu Dhabi Cassation Court dismissed these arguments, standing by the arbitral tribunal’s decision. Importantly, the Court upheld the arbitral award’s validity, noting that even if the award delved into issues not covered by the arbitration agreement, it would not be void if the award’s portions subject to arbitration could be separated from those that were not. The court further held that based on Article 393 of the UAE Civil Transactions Law, the first respondent was entitled to indirectly claim the last two respondents’ rights from the appellant, including resorting to arbitration under the construction contract between the appellant and the last two respondents. Thus, the arbitration award was affirmed, obliging the appellant to pay the first respondent the sum adjudged in the award, considering the first respondent as a representative of the second and third respondents. Reasoning The Court’s judgment was rooted in a number of principles. First, it relied on the fundamental notion that an arbitration agreement’s ambit defines the arbitrators’ jurisdiction. However, the Court applied a pragmatic approach in recognizing that an award may still be valid, even if it touches upon matters outside the arbitration agreement, provided those portions can be segregated without impacting the decision’s overall integrity. The Court’s decision also involved a careful interpretation of Articles 392 and 393 of the UAE Civil Transactions Law. The Court acknowledged that these provisions enabled a creditor to exercise all the rights of the debtor, even those not due for performance, subject to certain limitations. These provisions thereby authorized the first respondent to act on behalf of the other two respondents in claiming their rights from the appellant. This interpretation gave rise to an intriguing legal scenario, one where the first respondent was allowed to resort to arbitration based on the construction contract between the appellant and the last two respondents. Consequently, this reasoning empowered the first respondent to indirectly claim the last two respondents’ rights from the appellant through arbitration proceedings despite the lack of an arbitration agreement between the appellant and the first respondent. Significance The Court’s decision in this case sets several significant precedents and offers a profound avenue for future indirect claims, particularly for subcontractors in the construction sector in the UAE, such as in cases where a subcontractor attempts to pursue the employer on behalf of the main contractor via arbitration. Arbitration Agreement and Scope: The judgment underscores the arbitration agreement’s significance in delineating the arbitrators’ jurisdiction. However, it advances a nuanced interpretation, asserting that an arbitration award can still retain its validity even if it ventures beyond the agreement’s scope, as long as the portions relating to the arbitration agreement can be segregated from the rest. Role of Indirect Claims: Perhaps the most remarkable facet of this judgment is its interpretation and application of the provisions of the UAE Civil Transactions Law concerning indirect claims. By endorsing the first respondent’s capacity to act on behalf of the last two respondents in claiming their rights from the appellant, the Court offers a crucial precedent for the applicability of Articles 392 and 393. Arbitration and Indirect Claims: The judgment also establishes an essential principle regarding arbitration’s place within the domain of indirect claims. It affirms that a party representing another’s rights, under the context of Articles 392 and 393, may resort to arbitration under the original contract between the debtor and the creditor. Enforceability and Validity of Arbitral Awards: The ruling further adds to the ongoing dialogue concerning the enforceability and validity of arbitral awards. By upholding the award despite the appellant’s objections, the Court reinforces the UAE’s pro-arbitration stance and offers reassurance about the robustness and reliability of its arbitration regime. The decision’s legal implications are broad and far-reaching. It augments the body of legal precedents that will undoubtedly influence future disputes involving similar arbitration issues. It offers important guidance on interpreting the UAE Civil Transactions Law towards indirect arbitration claims under Articles 392 and 393 and provides valuable insights into the UAE’s arbitration landscape.

FIDIC 2023 Guide: Navigating Risk Effects and Contractor Relief Amidst COVID-19, Inflation and War

  The COVID-19 pandemic and the ongoing war have posed unprecedented challenges to the construction industry worldwide. Projects have faced significant disruptions, delays, and cost escalations due to factors such as unavailability of goods, supply chain disruptions, and fluctuating market conditions. In such scenarios, it is crucial for the parties involved to understand the contractual provisions and mechanisms available to them for relief under the FIDIC contract forms. In this article, references are made to the FIDIC 2017 Red, Yellow, and Silver Books. On 21 March 2023, FIDIC issued a Guidance Memorandum titled (FIDIC Contracts guidance on the effects of inflation and the unavailability of goods and labour following the global COVID-19 pandemic and the war in Ukraine) to provide a comprehensive guide linking the risk effects of these global events to the relevant provisions in the FIDIC contracts. To navigate the complexities arising from the COVID-19 pandemic and the war, the FIDIC Guide presents a concise checklist of conditions for relief under the respective FIDIC contract clauses. Establishing causation between the risk events and the impact on project performance is critical, and for Force Majeure or Exceptional Events (FM/EE), the party must demonstrate that prevention of performance has indeed occurred. Additionally, it is essential to comply with the notice requirements outlined in the FIDIC contracts. In accordance with Sub-Clause 1.3 (Communications), any notice provided under the conditions must be in writing and adhere to the stipulated format and content requirements. And it is imperative for the users to thoroughly analyze the facts, adhere to the detailed procedures specified in the General Conditions, as well as any amendments introduced by the Particular Conditions. The risk events covered in this article are: Unavailability of goods due to COVID-19, with or without alternative sources of supplies. Unavailability of goods because of the war in Ukraine, with or without alternative sources of supplies. Unavailability of goods due to trade bans against Russia, with or without alternative sources of supplies. Damage or loss to the goods, works, or Contractor’s documents due to the war. Inflation of costs resulting from the global events. Unbearable inflation or the continuing performance of the contract being economically non-viable. Impossibility to continue the project due to war or COVID-19. This article elaborates on the risk events, their contractual and legal basis, entitlements, and conditions as proposed by the FIDIC Guide. Unavailability of Goods Due to COVID-19 Risk Event: The unavailability of goods, with or without alternative sources of supplies, due to the COVID-19 pandemic can disrupt a project and result in delays and increased costs. Contractual/Legal Basis: This situation is covered under Sub-Clause 18.4 (Exceptional Events) and Sub-Clause 8.5 (Delay Damages) of the Red and Yellow Books. The Contractor may be entitled to an extension of time (EOT) and reimbursement for cost increases due to inflation. Entitlement: If the Contractor can prove that the unavailability of goods was caused by a prevention event as per SC 18.2, they may be eligible for relief. The Contractor must follow the claim procedure outlined in SC 20.2, which includes providing timely notice, mitigation efforts, and evidence of the impact. Conditions: The Contractor must adhere to the requirements in SC 18.2 (prevention), SC 18.2 (Notice), SC 18.3 (mitigation), SC 18.3 (Notices), and SC 20.2 (Claim procedure) to be entitled to relief. Unavailability of Goods Due to War in Ukraine Risk Event: The unavailability of goods, with or without alternative sources of supplies, due to the war in Ukraine can lead to project delays and increased costs. Contractual/Legal Basis: This situation is addressed under Sub-Clause 18.4 (Exceptional Events), which allows the Contractor to claim an extension of time (EOT) and cost, including prolongation costs and additional costs. Entitlement: If the Contractor can prove that the unavailability of goods was caused by an exceptional event as per SC 18.4, they may be eligible for relief. The Contractor must follow the claim procedure outlined in SC 20.2. Conditions: The Contractor must adhere to the requirements in SC 18.4, which are the same as mentioned in the COVID-19 risk event above. Unavailability of Goods Due to Trade Bans Against Russia Risk Event: The unavailability of goods, with or without alternative sources of supplies, due to trade bans against Russia can result in project delays and increased costs. Contractual/Legal Basis: This situation is covered under Sub-Clause 13.6 (Changes in Laws) and SC 20.2 (Claim procedure). The Contractor may be entitled to an extension of time (EOT) and cost, including prolongation costs and additional costs. Entitlement: The Contractor must prove that the unavailability of goods was caused by a change in the laws of the Country of the Site. They must follow the claim procedure outlined in SC 20.2 to be eligible for relief. Conditions: The Contractor must adhere to the requirements in SC 20.2 (Claim procedure). Damage or Loss to Goods, Works, and Contractor’s Documents Due to War Risk Event: Damage or loss to goods, works, or Contractor’s documents due to war can lead to project delays and increased costs. Contractual/Legal Basis: This situation is addressed under Sub-Clause 18.4 (Exceptional Events) for EOT and prolongation costs, and Sub-Clause 17.2 (Variation) for cost and profit related to instructed damage/loss rectification. Entitlement: If the Contractor can prove that the damage/loss was caused by an exceptional event as per SC 18.4 and follows the rectification instructions (deemed Variation), they may be eligible for relief. Conditions: The Contractor must adhere to the requirements in SC 18.4 (as mentioned in the COVID-19 risk event above) and SC 17.2 (Variation) for dealing with instructed damage/loss rectification. Inflation of Costs Risk Event: Inflation of costs can impact the cost of labor, goods, and other inputs to the works, affecting the financial viability of the project. Contractual/Legal Basis: This situation is covered under Sub-Clause 13.7 (Adjustment in the cost of labor, goods, and other inputs), Schedule(s) of Cost Indexation in the Contract, and SC 20.2 (Claim procedure). The Contractor may be entitled to an adjustment in costs if they can prove that inflation is above

Disruption and prolongation construction claims between Canada and the UK

  In the construction industry, disputes often arise due to delays and disruptions, leading to claims for additional time or costs. This article discusses the distinction between disruption and prolongation claims in the United Kingdom (UK) and Canada, with a focus on the application of formulas considering the basis of production, productivity, and efficiency in the pricing of construction work. Disruption Claims Disruption claims arise when a contractor experiences disturbances or hindrances in the construction process, leading to a loss of productivity and efficiency. These claims focus on the additional costs incurred due to the need for extra resources or altered work methods resulting from the disruption. In both the UK and Canada, disruption claims often rely on the “Measured Mile” approach to quantify losses. This approach compares the contractor’s productivity during an unaffected period (the “measured mile”) to the productivity during the disrupted period. By doing so, it calculates the loss of efficiency and translates it into financial terms. In the UK, the Hudson Formula is sometimes used as an alternative or supplement to the Measured Mile approach. The Hudson Formula calculates the loss of productivity by comparing the planned output to the actual output and multiplying the difference by the agreed rate per unit of output. Canadian courts may consider the concept of “cumulative impact,” where multiple disruptions accumulate and cause a more significant overall effect on the project. This approach recognizes that individual disruptions may not be significant in isolation, but their combined effect can have a substantial impact on the efficiency of the project. Prolongation Claims Prolongation claims pertain to the extension of time required to complete the project and the additional costs incurred by the contractor due to the delay. These claims focus on the financial consequences of the extended project duration, such as increased overheads and financing costs. In both the UK and Canada, prolongation claims often rely on the Emden Formula or the Eichleay Formula to calculate the additional costs incurred. The Emden Formula calculates the additional overhead costs by dividing the total overhead costs by the original contract period and multiplying the result by the number of days of delay. The Eichleay Formula, a more complex method, allocates the contractor’s overhead costs to the project on a pro-rata basis, considering the project’s share of the contractor’s total business during the delay period. Key Distinctions While the approaches in the UK and Canada treat both claims similarly, the formulas used to calculate losses may vary. The Measured Mile approach is common for disruption claims in both jurisdictions, while the Hudson Formula is more prevalent in the UK. For prolongation claims, the Emden and Eichleay formulas are commonly used in both jurisdictions.

Shariah rules and crypto disputes: UAE court judgment and official Fatwa invalidate cryptocurrency transaction

  Brief “Bitcoin is a digital currency that does not meet the legal and Sharia criteria that make it a currency subject to the rulings of dealing with official legal currencies recognized internationally. It also lacks the Sharia controls that make it a commodity capable of being exchanged for other commodities.” In a dispute over OneCoin cryptocurrency, a UAE court (Ras Al-Khaimah Primary Court) ordered the invalidation and rescindment of a cryptocurrency sale contract on the basis that the cryptocurrency transacted (OneCoin) was not a recognized currency or commodity in violation of Shariah rules and the Civil Transactions Law. Reference to Fatwa No. 89043 The Court referenced Fatwa No. 89043 issued by the General Authority for Islamic Affairs and Endowments in 2018 which addressed Bitcoin and cryptocurrencies in general. The Fatwa addressed the status of Bitcoin in that it did not possess the necessary specifications to make it a tradable currency, like the approved currencies that are traded worldwide. And that it also lacks the necessary legal requirements to be considered a commodity for exchange with other commodities. The following is the Fatwa content quoted by the Court in its reasoning: “Firstly, defining Bitcoin: Those who call Bitcoin a currency describe it as a virtual, intangible electronic currency with no physical existence. These currencies, with their varying types, methods of access, and acquisition, have been widespread and known for several years. Among the most famous are Ethereum, Dash, Ripple, Litecoin, and Ethereum Classic, all of which are digital currencies, each with its characteristics, features, and ways of processing and generation. The purpose of resorting to such currencies is that they are decentralized, allowing individuals to control them, providing them with a high degree of privacy and confidentiality, and they cannot be tracked because they do not rely on official institutions and intermediary financial entities like banks. As they are not linked to any financial institution, they have no real assets or balances, are not protected by any financial regulations or laws, and are not subject to any regulatory authority. This has been one of the reasons for their exposure to massive increases or sharp declines, and in addition to all this: the unawareness of who is behind the promotion of this virtual currency makes it susceptible to damage and loss of value in the face of any sudden changes. For this reason, no country in the world, including the United Arab Emirates, has recognized Bitcoin as legal tender. Secondly, the Sharia criteria considered in currencies: In the previous paragraph, we provided a description that clarifies the reality of this currency in its current state. In this paragraph, we mention the most important Sharia requirement for considering anything as currency, which is: state adoption, meaning that it should be issued by the state. This is what the scholars express as minting or striking coins. This is explained as follows: The adoption of monetary currencies is considered a special function of the state in Sharia. The state alone has the right to issue coins, according to the adopted laws and regulations. This is explicitly stated in the texts of scholars, whether for metallic money – like gold dinars or silver dirhams – which have intrinsic value and were prevalent in the past, or for credit currencies that rely on the power of the law and do not have intrinsic value, such as paper currencies, which have become prevalent worldwide. In conclusion, Bitcoin is a digital currency that does not meet the legal and Sharia criteria that make it a currency subject to the rulings of dealing with official legal currencies recognized internationally. It also lacks the Sharia controls that make it a commodity capable of being exchanged for other commodities. Therefore, it is not permissible to deal with Bitcoin or other electronic currencies that do not meet the recognized Sharia and legal criteria, as dealing with them leads to unsound consequences, whether for the individuals involved, the financial markets, or the entire community, and whether we consider it cash or a commodity, the ruling encompasses both cases.” (United Arab Emirates – General Authority for Islamic Affairs and Endowments, Fatwa No. 89043 dated 30/1/2018) Invalidity of a cryptocurrency contract In its reasoning in Primary Court case no. 87/2020 (Ras Al-Khaimah), the Court applied the statutes, case law, and legislative commentary, that govern the validity of contracts under the Civil Transactions Law. The following are extracts from the respective judgment. “According to the provisions of Articles 125, 129, and 141 of the Civil Transactions Law, a contract is the binding commitment issued by one of the parties by accepting the other party’s offer and their mutual agreement in a way that establishes its effect on the subject matter and results in the obligation of each party to fulfill what is required of them to the other party. For a contract to be concluded, both parties must agree on the essential elements of the obligation and on the other legitimate conditions that indicate their essentiality, and the subject matter of the contract must be something possible, specific, or determinable and permissible to deal with. (Federal Supreme Court – Civil and Commercial Judgments – Appeal No. 226 of the year 25 Judicial – Civil and Commercial Circuit – dated 2006-03-14 Technical Office 28 Part 1 Page 525) Article 202 of the Civil Transactions Law stipulates the possibility of having a future thing as the subject matter for counterbalances if the uncertainty is eliminated. The explanatory memorandum clarified the meaning of uncertainty as the inability to deliver, based on the statements of Ibn Al-Qayyim, which can be summarized in that there is nothing in the Book of Allah or the Sunnah of His Messenger (peace be upon him) that indicates that a contract on something non-existent is not permissible, and to what is mentioned in the Sunnah of the prohibition of selling some non-existent things as in his saying (peace be upon him) “Do not sell what you do not have”. The reason is not non-existence,

Landmark Judgment on the Extension of Arbitration Agreements to Non-Parties through Indirect Claims in Jordan

  The Economic Chamber of the Amman Court of First Instance issued a groundbreaking judgment addressing the topic of extending arbitration agreements to non-parties through indirect claims. Case Background The plaintiff filed a lawsuit against the defendant, demanding a sum exceeding $30 million. In the statement of claim, the plaintiff insisted that they were filing this lawsuit on behalf of Company S, pursuant to the provisions of indirect litigation as stated in Articles 366 and 367 of the Jordanian Civil Law. Article 366: (1) Every creditor, even if their right is not due for performance, may pursue all the rights of their debtor, except for those related to their person or unattachable. (2) The creditor’s use of the debtor’s rights is only accepted if they prove that the debtor has not exercised these rights and that their neglect is likely to lead to their insolvency. The debtor must be included in the lawsuit. Article 367: The creditor is considered a representative of their debtor in exercising their rights, and any benefit resulting from the exercise of these rights enters the debtor’s assets and serves as a guarantee for all their creditors. Parties Involved and Contractual Relationship The plaintiff clarified that the defendant, Company P, had previously entered into a construction contract with Company S for the purpose of building a structure. In line with the contract and to fulfill its obligations, Bank A, at the request of Company S, issued two guarantees in favor of the defendant, Company P, as follows: A performance bond worth approximately $20 million. An advance payment guarantee worth approximately $11 million. Despite Company S fulfilling its obligations and handing over the project to the defendant, the latter allegedly unjustly liquidated the aforementioned guarantees by requesting the issuing bank to do so, and subsequently appropriated the stated amount. Plaintiff’s Demand As a result, the plaintiff demanded the reimbursement of the guarantee amounts that the defendant company had seized for the benefit of Company S. Arbitration Clause in the Construction Contract The court noted that the construction contract connecting Company P and Company S included the latter’s obligation to issue an advance payment guarantee and a performance bond. The agreement also defined the scope of each party’s obligations and rights. The agreement stipulated that any dispute or conflict not resolved within forty days after submitting the dispute notice, whether a dispute meeting was held or not, should be referred to arbitration according to the provisions detailed in the contract (the “Provisions”). The arbitration would take place before a tribunal consisting of three arbitrators: one appointed by the employer, another by the contractor, and a third appointed by the appointed arbitrators in accordance with the Provisions. The arbitration venue would be in the country, and the arbitration language would be English. Both parties would waive any right to appeal before any court in any jurisdiction to the extent that such waiver could be properly made. The arbitration rules were to be in accordance with the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules. Indirect Litigation and Plaintiff’s Position The court highlighted in its judgment that the plaintiff did not file the lawsuit in their personal capacity, but rather relied on the rules of indirect litigation, in accordance with Articles 366 and 367 of the Civil Law. The plaintiff confirmed that the lawsuit aimed to return the claimed amounts to Company S’s general guarantee, and explicitly stated that they were filing the lawsuit on behalf of Company S. The court pointed out that the Jordanian legislator regulated indirect litigation as a means to ensure that a creditor has the right to file a lawsuit on behalf of their negligent debtor before the latter’s debtor, thereby increasing the general guarantee and collecting the rights that the negligent debtor fails to exercise. Plaintiff’s Role in Indirect Litigation The court then concluded that, given the plaintiff’s position in the lawsuit, the requirements of direct litigation, according to the explicit text of Article 367 of the Civil Law, imply that the plaintiff in direct litigation only claims the rights of their debtor on their behalf. The court continued that, since the plaintiff in direct litigation legally represents their debtor, it follows that the defendant (the debtor’s debtor) has the right to invoke all legal defenses against the plaintiff that they possess against the debtor. Legal Subrogation and Arbitration Clauses in Jordanian Courts The court based its opinion on what was stated by Dr. Abdul Razzaq Al-Sanhouri: “The effects of the indirect claim are all centered on the basic idea of the creditor representing the debtor, as previously mentioned, and the representation here is a legal one…” (Dr. Abdul Razzaq Al-Sanhouri, Mediator in the Explanation of Civil Law, Volume 2, General Theory of Obligations: Evidence – Effects of Obligations, Revival of Arab Heritage House, Beirut, p. 269) The court concluded that the concept of legal representation stipulated in Articles 108-115 of the Civil Law is required in the relationship between the representative and the debtor. The latter can assert before the representative all the conditions or qualities surrounding his obligation when facing the principal. Naturally, this applies to the arbitration clause as well. The court cited Dr. Fathi Waly’s as well in its reasoning: “If there is a substitution in the obligation, the substitution includes the arbitration clause. Thus, if a third party fulfills the debt and replaces the creditor who has satisfied his claim against the debtor, this third party, whether by law or agreement between them and the creditor or debtor, is bound by the arbitration agreement between the creditor and the debtor. They replace the creditor in this agreement when they claim their right against the debtor, replacing the creditor’s right.” (Dr. Fathi Waly, Arbitration Law in Theory and Practice, First Edition 2007, Knowledge Foundation, Alexandria, pp. 167-168) The court also quoted Dr. Waly as follows: “Applying this, it has been ruled that the arbitration clause in the subcontract between the main contractor and the subcontractor regarding disputes

UAE Federal Court rules no penalties on voluntary disclosures related to unintentional tax errors

  Overview The taxpayer filed its tax return with incorrect amounts by mistakenly calculating the tax rate at a different value than the standard rate of 5%, resulting in an incorrect tax amount. The taxpayer submitted a voluntary disclosure to correct the error, and the Federal Tax Authority imposed a penalty for the difference between the incorrect and correct tax amounts. The Federal Primary Court, adjudicating the dispute, ruled that what the taxpayer did in the original form of submitting the voluntary disclosure subject to the contested tax is nothing more than a correction of the error it made when calculating the tax imposed on it for its activity at a different rate instead of the standard rate of 5%, and it is not a voluntary disclosure of errors in the value of the tax return or tax assessment, for which the penalties prescribed in Cabinet Resolution No. 40/2017 and its amendments are due, and therefore the imposition of penalties loses its legal basis. The Court reasoned that the voluntary disclosure subject of this dispute, is merely a correction of an “unintentional error in calculating the tax”. Instead of using a 5% rate, the company mistakenly applied a different rate in the tax return. The judgment confirms that this voluntary disclosure is not a “disclosure of errors in the tax return or assessment”, which would warrant penalties as per Cabinet Decision No. 40/2017 and its amendments. As a result, the Federal Primary Court found that the imposition of penalties lacks a valid legal basis. Significance This judgment comes as a relief to taxpayers in the UAE because it provides a more lenient interpretation of the tax regulations and reduces the likelihood of penalties for honest mistakes. By differentiating between an “unintentional error in calculating the tax” and “a voluntary disclosure of errors in the tax return or assessment” the Court ruling essentially provides taxpayers with a more forgiving approach to correcting their tax filings. In the given ruling, the Federal Primary Court treats the voluntary disclosure submitted by the taxpayer as a correction of an unintentional error rather than a voluntary disclosure of errors in the tax return or assessment. This interpretation has significant implications for taxpayers in terms of reduced penalties. According to Cabinet Decision No. 40/2017 and its amendments, penalties can be imposed on taxpayers for errors in tax returns or assessments. By treating certain voluntary disclosures as a correction of an unintentional error, the court effectively eliminates the legal basis for imposing such penalties. Overall, the judgment is a relief to UAE taxpayers because it offers a more favorable interpretation of the tax regulations, reduces the likelihood of penalties for unintentional errors, and encourages voluntary disclosure and correction of such errors.

Navigating International Jurisdiction in Fraud Cases: Scenna v Persons Unknown and Its Implications

  Introduction The introduction of a new jurisdictional gateway into the UK Civil Procedure Rules (CPR) in October 2022 has attracted significant attention from practitioners involved in cross-border fraud disputes. The new gateway, provided under CPR PD6B, para 3.1(25), allows parties to obtain ‘Norwich Pharmacal’ relief from foreign non-parties, significantly expediting the process of obtaining evidence from overseas parties in comparison to older, more cumbersome mechanisms such as the Hague Evidence Convention. However, a recent High Court decision, Scenna v Persons Unknown, has demonstrated that the new gateway may not be the panacea it was initially perceived to be. The New Jurisdictional Gateway Purpose and Scope The new gateway under CPR PD6B, para 3.1(25) was introduced to address the challenges faced by victims of cross-border fraud in obtaining information from non-parties based in other jurisdictions. The gateway permits applications for disclosure orders to be served on foreign non-parties for the purposes of identifying a defendant or establishing the whereabouts of the claimant’s property. Benefits for Practitioners The new gateway has been widely welcomed by practitioners in the field of fraud disputes with a cross-border element. The key advantage of the new gateway is its speed and efficiency in obtaining evidence from foreign parties, especially when compared to the more time-consuming and complex processes under the Hague Evidence Convention, or mutual legal assistance treaties. The High Court Decision in Scenna v Persons Unknown Background and Facts In Scenna v Persons Unknown, the claimants, a Canadian resident and his Ontario-registered company, were victims of an alleged fraud. The first to third defendants, the alleged fraudsters, persuaded the claimants to make various payments totaling around US$2.9 million to accounts held at banks in Hong Kong and Australia. The claimants sought disclosure orders against two Australian banks to obtain information needed to establish the whereabouts of their monies. The court granted the disclosure orders under the new jurisdictional gateway, but the banks argued that complying with these orders would put them in breach of their local laws. The Court’s Ruling The High Court ultimately set aside the disclosure orders against the Australian banks, stating that such orders should only be allowed in exceptional circumstances. The court reasoned that the risk of foreign banks breaching their local laws when complying with disclosure orders outweighed the benefits of the new jurisdictional gateway. In the Scenna case, the court characterized the pursuit as “luke warm” rather than a “hot pursuit,” and thus determined that the appropriate course of action was for the claimants to obtain a disclosure order from the Australian courts. Implications of the Scenna Decision Limitations of the New Jurisdictional Gateway The High Court’s decision in Scenna highlights the limitations of the new jurisdictional gateway, which may not be the ‘magic bullet’ practitioners initially hoped for. While the gateway has streamlined the process of obtaining evidence from foreign parties, it is crucial for parties and practitioners to be aware of the potential legal risks and obstacles involved in obtaining disclosure orders against foreign non-parties, particularly financial institutions. Balancing Interests and Compliance The Scenna decision underscores the importance of striking a balance between the interests of victims of cross-border fraud and the need for foreign non-parties to comply with their local laws. Practitioners should carefully assess the likelihood of foreign non-parties being able to comply with disclosure orders without breaching local laws before pursuing such orders under the new gateway. Utilizing Common Law Courts Worldwide Common law courts in various jurisdictions, such as Singapore, Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM), Canada, Australia, and others, can consider Mareva injunctions, Norwich Pharmacal orders, and Anton Piller orders. Whether a court has the authority to grant these orders depends on the rules of the jurisdiction and the nexus between the parties and the court. In some jurisdictions, such as the DIFC and ADGM, the courts can grant these orders even if the parties have no direct nexus to the court’s jurisdiction, provided that there are sufficient grounds to justify the exercise of jurisdiction. In other jurisdictions, such as Canada and Australia, the courts may require a more direct connection between the parties or the dispute and the jurisdiction to grant these orders. A Mareva injunction is a worldwide freezing and asset disclosure order. It extends to all a defendant’s assets worldwide, limiting the defendant from utilizing those assets except for regulatory purposes (i.e., paying employment salaries) unless consent is granted by the plaintiff. Norwich orders – or Norwich Pharmacal orders – are injunctive orders obtained against an innocent third party in order to identify a wrongdoer or details related to a potential wrongdoer. A Norwich order compels an innocent third party (such as a bank) to disclose relevant information to a plaintiff/applicant. Anton Piller orders, also known as search orders, are a legal remedy granted by common law courts to preserve evidence that may be at risk of destruction or concealment. These orders permit the applicant to enter the defendant’s premises to search, inspect, and seize relevant evidence, often without prior notice.

UAE cryptocurrency mining disputes: Dubai Court judgment sheds light on Bitcoin mining investment issues

  Introduction A recent judgment by the Dubai Appeals Court following a series of civil suits and criminal complaints has shed light on pitfalls and best practices when faced with disputes arising from cryptocurrency mining investments and when litigated before the UAE courts. This case involved a complicated series of litigation including multiple civil disputes before the Dubai Courts at various levels, criminal complaints, and various investments. This article explores the principal claims and remedies, with a focus on the complexities surrounding cryptocurrency mining and the legal ramifications when volatility is attached to such investments. Case Claims of misrepresentation and inflated fees in a cryptocurrency mining investment The plaintiff claimed that they had invested USD 300,000 in a cryptocurrency mining device through a partnership, which was held for over four months before the device was purchased. And that the defendants had admitted that the initial price of the device was USD 1,200,000 with the partnership share of the plaintiff at 25%. The plaintiff also alleged that it was later discovered that the actual price of the device was USD 1,100,000 and the defendants had charged a commission of USD 220,000. As a result, the final price of the device was USD 880,000 and the actual partnership share of the plaintiff in the partnership owning the cryptocurrency mining device should have been 34%. Inequitable distribution of Bitcoin earnings The court sided with the plaintiff that the losses suffered were further exacerbated by the distribution of Bitcoin earnings based on the original partnership share of 25%, rather than the corrected share of 34% which led to the plaintiff receiving a lower value of USD 175,000. Fluctuating Bitcoin value and delayed transactions The plaintiff also argued another issue that contributed to their losses was the decline in the value of Bitcoin from USD 19,000 to USD 6,000 over the seven-month period during which the second defendant refused to transfer the cryptocurrency to the account of the plaintiff. Consequently, the plaintiff argued that the total amount they should have received was estimated at about USD 1,900,000 in relation to the Bitcoin mining device investment. Lack of legal ownership and regulatory compliance The court also noted that the plaintiff was not registered as the owner of a 34% share of the mining device, with the entirety of the ownership retained by the second defendant. Additionally, the plaintiff argued that the defendants were operating without a license from the Securities and Commodities Authority to engage in investment management activities. Lack of Information on the mining device production It was evidenced to the court that 66.21021 Bitcoins were transferred to the wallet of the plaintiff during the period from 27 September 2017 to 31 October 2018. However, experts appointed by the court were not provided with data on the production capacity of the cryptocurrency mining and the number of Bitcoins produced during that period to verify the correctness of the Bitcoins transferred to the plaintiff, nor were the experts provided with information on Bitcoin distributions that had occurred after 31 October 2018. Dispute over investment and rising mining costs The investment was reportedly halted due to disputes between the parties and rising mining costs. This led the plaintiff and the defendants to suspend operations until the end of 2021 to decide whether to resume operations, sell the assets, or liquidate the project. The fate of the cryptocurrency mining device was not disclosed, and no evidence was provided to indicate that the device ceased operations on 31 October 2018. Bitcoin wallet and losses The plaintiff sold their Bitcoin wallet on the same date it was received. The total value of the Bitcoins sold amounted to USD 499,961.89. The first defendant held the Bitcoin profits of the plaintiff for the period from October 2017 to February 2018, totaling five months. The court found that the Bitcoin transfers to the plaintiff resumed on 17 March 2018, with the delayed payments resulting in a decrease in Bitcoin value and losses of USD 92,676.01 for the plaintiff. Takeaways Drawing upon the details of this case, we outline strategies and tactics to increase the efficacy of cryptocurrency mining claims and what pitfalls to avoid when litigating cryptocurrency mining investments before the courts in the UAE: Ensure transparency in crypto-mining investment agreements including accurate device prices, commission fees, and ownership percentages. Establish a fair and well-documented distribution of cryptocurrency earnings based on accurate ownership percentages and agreed-upon terms. Cryptocurrency value fluctuations can significantly impact investments. To minimize potential disputes arising from these fluctuations, parties should agree on strategies to mitigate their effects, such as setting predefined conditions for the transfer of assets or establishing a mechanism to address delays in transactions. Ensure that the ownership of mining devices and other assets is properly registered and compliant with local regulations and that parties engaging have the necessary licenses from relevant authorities. Justify hashrate and mining power guarantees. Disputes can arise if the mining company guarantees a certain hashrate or mining power but fails to deliver, especially if the reasons for underperformance are not clear or considered acceptable. When pursuing a cryptocurrency mining claim, it is crucial to have complete and accurate data on the production of the mining device and the amounts produced during the relevant period. This helps in verifying the correctness of the cryptocurrency distributions made to the involved parties. If the mining company has control over which mining pool to join, disputes can arise if investors believe the chosen pool is not providing optimal returns. In the event of rising mining costs, it is important to have a predefined plan in place to address such issues. The plan could involve suspending operations, selling assets, or liquidating the project, but should be transparent and agreed upon by all parties. Establishing a clear course of action in advance can help prevent additional losses and further disputes. Cryptocurrency disputes can be highly complex and require specialized knowledge. It is essential to engage dispute counsel who have expertise in blockchain and digital asset disputes. Including

Public procurement construction contract forms under the Austroads and the Australasian Procurement and Construction Council (APCC) Guide

  The Austroads and the Australasian Procurement and Construction Council (APCC) published in 2014 the Building and Construction Procurement Guide – Principles and Options, which outlines the various standard forms of contracts for different delivery models, as well as the dispute resolution procedures available. The most commonly used standard form of contract for major works construction is AS2124-1992. It is widely used for straightforward infrastructure projects in the civil (road and bridge) and non-residential building sectors. This contract form provides general conditions of contract that govern the rights and obligations of the parties involved. The traditional contract, which is the most common form of a construction contract, is an example of this. In addition to AS2124-1992, other standard forms of contracts also exist. For instance, GC21 is the standard form of construction contract that is prescribed for use by NSW state agencies, and it is also used in the ACT. NPWC3-1981 is the National Public Works Committee form of contract (Edition 3), which was published in 1981 and is still in use by member agencies in the NT (both sectors) and VIC (road and bridge sector only). AS4000-1997 is the standard form that replaced AS2124-1992, but it has not been widely taken up by member agencies, particularly in the civil (road and bridge) sector. Another delivery model is the design and construct (D&C) contract form, which is commonly used in D&C projects. AS4300-1995 is the most commonly used standard form of contract for this delivery model. However, other jurisdictions use agency templates or custom-designed agreements, such as GC21, NPWC3-1981, or modified versions of AS2124-1992. Construction management is another delivery model used in the non-residential building sector. Modified versions of AS4916-2002 or AS2124-1992 are used in various jurisdictions. VIC agencies use either amended Department of Health construction management contracts or custom-designed agreements. In the civil (road and bridge) sector, construction management has only been used for road and bridge works procurements in the ACT, with a custom-designed agreement based on a standard ‘Project Management Agreement’ (PMA) being the form of contract. The managing contractor delivery model is commonly used in the non-residential building sector. Modified versions of GC21 are used by NSW, SA, and the ACT. Other jurisdictions use agency templates or custom-designed agreements, such as the ‘Managing Contractor Design and Construction Management’ contract, which is the most common form of contract used for this delivery model in QLD. In the civil (road and bridge) sector, the managing contractor delivery model is currently only used in the NT, along with one previous use in VIC, supported by custom-designed agreements. Direct managed arrangements in the construction industry utilize many different styles of contracts, predominantly short-form in-house trade agreements. Standard forms of contracts are not available for the Early Contractor Involvement (ECI) delivery model. However, some jurisdictions, such as QLD and WA, have their own form of contract based on two separate agreements for Stages 1 and 2, which have been extensively tailored on a case-by-case basis to meet the requirements of each project. The alliance delivery model has a template ‘Project Alliance Agreement’, which was recently released by the Department of Infrastructure and Transport, to be used as the basis for contract documentation for all alliances, unless prior approval is given. For public-private partnership (PPP) delivery models, high-level commercial principles are described in the National Public Private Partnership Policy and Guidelines, which must be taken into account by member agencies as part of the drafting process for any standard or custom-designed PPP contracts. PPPs are outcome-based rather than prescriptive with respect to specifications, performance standards, etc., and as such, standard forms of contract are not available. However, agencies may have their own form of contract, such as in NSW, where the member agency utilizes in-house template PPP or Build Own Operate Transfer (BOOT) deeds customized to accommodate project requirements. Professional services arrangements in the construction industry are based on various forms of contracts, depending on the jurisdiction. AS4122-2010 is used by two jurisdictions (SA and TAS) as the basis for their professional services arrangements. The TAS agency also uses a whole-of-government ‘Standing Offer for Services’ form of contract for panel arrangements. The WA agency uses the ‘Request Conditions and General Conditions of Contract’ (2012), which is a document by the Government of Western Australia, Department of Finance. The remaining member agencies have their own standard in-house forms of contracts, which are tailored for each procurement. APCC member agencies use a mixture of AS4122 (2000 and 2010 versions), agency templates, and custom-designed agreements to secure their professional services arrangements. Dispute resolution procedures in the construction industry in Australia are available to parties to help resolve disputes that may arise during the course of a project. These procedures aim to provide an efficient and cost-effective way to resolve disputes, without resorting to litigation. There are several dispute resolution procedures available, including negotiation, mediation, arbitration, and litigation. The construction industry in Australia has various standard forms of contracts for different delivery models, which provide guidance on the contractual arrangements between the parties involved in the project. AS2124-1992 is the most commonly used standard form of contract for major works construction, but other standard forms of contracts also exist. Dispute resolution procedures, such as negotiation, mediation, arbitration, and litigation, are available to parties to help resolve disputes that may arise during the course of a project. By understanding the various contract forms and dispute resolution procedures available, parties can work together more effectively, and disputes can be resolved efficiently and effectively.

No tax penalties without Federal Tax Authority public clarification – rules the Dubai tax dispute resolution committee

  In various decisions issued by the (second) Tax Dispute Resolution Committee of Dubai, the Committee ordered that tax obligations that are not explicitly provided for in the legislation do not create a tax obligation on the taxpayers until a public clarification is issued by the Federal Tax Authority. Disputes Three separate disputes were heard in 2023 by the (second) Tax Dispute Resolution Committee of Dubai on whether penalties should be applied to taxpayers against matters that are not explicitly clear in the legislation – but were instead clarified by the Federal Tax Authority via public clarification. The FTA ordered the taxpayers to voluntarily disclose certain liabilities. The FTA instructed the taxpayers that the tax legislation required certain tax liabilities to be disclosed by the taxpayers. The taxpayers argued that the tax legislation did not explicitly require disclosing said liabilities. The position of the FTA was that irrespective of whether the taxpayer had read the legislation in a particular manner – the understanding of the taxpayer should have been as that of the FTA. The FTA also relied on a public clarification that it had issued in mid-2022 to justify its position. The taxpayers complied with the FTA instructions and filed voluntary disclosures throughout the year 2022. The FTA applied the tax liabilities in addition to tax penalties against voluntary disclosure filings and late payments. The taxpayers disputed the taxes and penalties before the Tax Dispute Resolution Committee. Decision The Tax Dispute Resolution Committee issued similar findings in the three disputes as follows: The tax legislation does not explicitly require the disclosure that the FTA had instructed the taxpayers to make. The position on how the tax legislation should be applied by the FTA was unknown to the taxpayer as it was derived from the specific legislative interpretation by the FTA. The interpretation of the tax liabilities by the FTA only became known to the taxpayers via the public clarification issued by the FTA. The taxpayers cannot be penalized for tax liabilities that dominantly arise from a public clarification issued by the FTA if such tax liabilities are not explicitly provided for in the tax legislation. The Committee ordered the cancellation of all penalties up to the date of issuance of the public clarification by the FTA. Takeaway A substantial number of tax disputes in the UAE arise from differences in interpretation of the tax legislation – whether value-added tax legislation, excise tax legislation, or in due course, corporate income tax laws. The decisions issued by the (second) Tax Dispute Resolution Committee of Dubai provide solace to taxpayers who are faced with penalty liabilities dating back to October 2017 or January 2018 for interpretations of tax legislation that differ from the interpretation by the FTA.

Australia FIRB commercial land foreign investment guidance 2023

  Overview In January 2023, the Foreign Investment Review Board issued a series of guidance notes to assist investors and stakeholders in their engagement with foreign investments in Australia. As a foreign investor, it is crucial to understand the intricacies of the Australian Foreign Acquisitions and Takeovers Act 1975, which requires foreign persons seeking to acquire an interest in commercial land to obtain foreign investment approval. Developed commercial land has a monetary threshold of $310 million, while sensitive commercial land has a threshold of $67 million. However, if the foreign person is from a certain free trade agreement partner, the threshold is $1,339 million, regardless of the land’s sensitivity. It is important to note that even if the proposed investment falls below the monetary threshold, foreign investment approval is still required if the land is considered “national security land.” Commercial land is defined as land in Australia, including any building on the land, or the seabed of the offshore area, other than land used wholly and exclusively for a primary production business or land on which the number of dwellings that could reasonably be built is less than 10. For an acquisition of vacant commercial land to be approved, it is generally conditional on the land being put to productive use within a reasonable timeframe. Additionally, an exemption certificate covering acquisitions of vacant commercial land for the purpose of undertaking a primary production business or residential development is conditional on Australian investors having an equal opportunity to invest in that land through an open and transparent sale process. Foreign persons must keep records relating to certain actions concerning their foreign investment for up to five years. Applications for foreign investment approval must be submitted electronically on the Foreign Investment Review Board (FIRB) website and are supported by further guidance. A fee is payable for all foreign investment applications. Breaches of foreign investment law may attract significant penalties, including infringement notices, civil, and criminal penalties. However, Part 3 of the Foreign Acquisitions and Takeovers Regulation 2015 provides a number of exemptions where an acquisition of commercial land may not be considered a notifiable action, a significant action, and/or a notifiable national security action, and may thus not need to be notified to the Treasurer. Foreign persons must not take a notifiable and significant action or a notifiable national security action until they have received foreign investment approval for that proposed action. A proposed investment will be screened for foreign investment approval under the national interest test if it is a notifiable and significant action. If the proposed investment is a notifiable national security action and not also a significant action, it will be screened under the narrower national security test. The Treasurer has the power to make a range of orders in relation to a significant action that a person is proposing to take or has already taken, even if they do not inform the Treasurer about it. Certain foreign investments that are not notifiable actions or notifiable national security actions may be reviewable national security actions. Where a reviewable national security action is not notified to the Treasurer, the action may be called-in for review if the Treasurer considers that the action may pose a national security concern. Foreign persons can choose to extinguish the Treasurer’s call-in power by voluntarily notifying reviewable national security actions. The National Security Guidance Note outlines investment areas that may raise national security concerns, where investors are therefore encouraged to voluntarily notify. Uderstanding these guidance notes is crucial for any foreign investor looking to engage in commercial land investments in Australia. Ensuring that all necessary steps are taken to comply with foreign investment approval requirements will mitigate the risk of incurring penalties or having investments called-in for review. Thresholds for commercial land investments When it comes to investing in commercial land in Australia, foreign persons are required to obtain foreign investment approval, and the monetary threshold for such investments is based on the consideration for the investment, not the value of the land. The applicable threshold is dependent on whether the land is vacant or developed, whether it is considered sensitive land, the nationality of the investor, and whether the foreign person is a foreign government investor. For foreign government investors, there is a $0 threshold for all types of commercial land. Private investors from certain free trade agreement (FTA) partners, except Hong Kong, have a $0 monetary threshold for investment in vacant commercial land and a $1,339 million threshold for investment in developed commercial land. For private investors from Hong Kong, there is a $0 threshold for investment in vacant commercial land, a $67 million threshold for investment in sensitive developed commercial land, and a $1,339 million threshold for investment in developed (non-sensitive) commercial land. For private investors from India, the threshold is $500 million for investments in developed (non-sensitive) commercial land acquired predominantly for the supply of a service through a commercial presence in Australia. All other private investors have a $0 threshold for investment in vacant commercial land, a $67 million threshold for investment in sensitive developed commercial land, and a $310 million threshold for investment in developed (non-sensitive) commercial land. For all investments in national security land, the monetary threshold is $0, regardless of the investor. Commercial land is considered vacant commercial land if there is no substantive permanent building on the land that can be lawfully occupied by persons, goods, or livestock. Vacant commercial land investments As part of the national interest test, the Treasurer will generally ensure that vacant commercial land is put to productive use within a reasonable timeframe and that ‘land banking’ does not occur. If an application for vacant commercial land is approved, it will generally be subject to conditions such as the land being developed, continuous construction of the proposed development commencing within five years of completing the purchase of the land, and the land not being sold, transferred, or otherwise disposed of before the development is completed. Foreign persons must not dispose of

New instruments announced by Dubai Courts to expedite and support enforcement of judgments and arbitration awards

  On 22 February 2023, Dubai unveiled a new strategic plan that is set to further advance its judicial system towards a world-class model for efficiency and service excellence. The benefits that will be derived by litigants in Dubai, especially those with high-value claims, cross-jurisdictional disputes, arbitration matters, and litigants with potentially insolvent debtors are significant. The first major development in the strategic plan is the Privatisation of Execution Procedures. Aligned with the procedures of Civil Law No. (42) of 2022, the Dubai Courts will issue a decision to license private companies to provide judgment execution services. By allowing private companies to participate in the execution of judgments, the speed and efficiency of the process are expected to increase significantly. Moreover, to address market competition, private companies may provide innovative approaches to enforcement, which can lead to the development of new technologies and processes that improve the efficiency and effectiveness of enforcement actions. Under the new plan, litigants with high-value claims will benefit from an advanced judicial system that exceeds global benchmarks for speed, efficiency, and service excellence. The new initiatives will expedite the execution of judgments and redesign processes to enforce court judgments, making it easier for judgment creditors to recover their assets. The Electronic Writ of Execution Seal initiative, for example, will facilitate the enforcement of court judgments and potentially arbitration awards through an electronic seal, making the process more efficient and less time-consuming. This can be particularly useful in cases where the judgment debtor is difficult to locate or where assets are spread across multiple jurisdictions. Cross-jurisdictional disputes can be a challenge, but with the new initiatives, litigants in Dubai can expect an easier and more efficient process. The new plan includes the Smart Requests initiative, which aims to streamline the Writ of Execution procedures, making the process more transparent and easier to track. This will reduce delays and ensure that the judicial system runs smoothly. Litigants involved in collection claims will also benefit from the new initiatives, especially those relating to recognition and enforcement. The Disclosure Platform initiative, for example, will enable all authorities and officials involved in the execution of a ruling to be notified about the funds and assets of judgment debtors. This will allow officials to track and recover assets, helping to ensure that the judicial system operates at peak efficiency more easily. Litigants with potentially insolvent debtors can also expect to benefit from the new initiatives. The Sale Notification System initiative creates a system for notifying officials in charge of the execution of a judgment about items confiscated as part of a ruling so that they can be sold within a specified time frame. This initiative will ensure that assets are sold in a timely manner, and that judgment creditors receive the compensation they are owed. Furthermore, the integration with the Ministry of Interior will ensure that rulings are enforced with the help of police and security departments. This initiative will ensure that enforcement is efficient and transparent, helping to protect the rights of all parties involved in a case. This can be particularly beneficial for foreign investors and litigants who may be concerned about the enforceability of their rights in a foreign jurisdiction and can increase compliance with court orders and help prevent further disputes from arising. In conclusion, the new strategic plan announced by Dubai Courts is set to benefit litigants in Dubai, especially those with high-value claims, cross-jurisdictional disputes, arbitration matters, litigants with potentially insolvent debtors, and will support procedures for recognition and enforcement of judgments and arbitration awards.

حكماً مستحدثاً من المحاكم الأردنية يصرح بامتداد اتفاق التحكيم لغير الموقعين عليه

09 فبراير 2023 كانت الغرفة الاقتصادية في محكمة عمان الابتدائية قد أصدرت حكماً قضائياً مستحدثاً تناولت فيه موضوع امتداد شرط التحكيم في عقود المقاولة، ولما لهذا الحكم من أهمية نستعرضه على النحو التالي. تتلخص واقعة الدعوى بأن المدعية أقامت دعواها بمواجهة المدعى عليها مطالبة اياها بمبلغ يتجاوز ال30 مليون دولار أمريكي، وقد تمسكت المدعية في لائحة دعواها أنها تقيم هذه الدعوى بالنيابة عن شركة (س) بموجب أحكام الدعوى غير المباشرة وفق منطوق المادتين 366، 367 من القانون المدني الأردني. المادة 366: (1) لكل دائن ولو لم يكن حقه مستحق الاداء ان يباشر باسم مدينه جميع حقوق هذا المدين الا ما كان منها متصلا بشخصه خاصة او غير قابل للحجز. (2) ولا يكون استعمال الدائن لحقوق مدينه مقبولا الا اذا أثبت ان المدين لم يستعمل هذه الحقوق وان اهماله من شأنه ان يؤدي الى اعساره ويجب ادخال المدين في الدعوى. المادة 367: يعتبر الدائن نائبا عن مدينه في استعمال حقوقه وكل نفع يعود من استعمال هذه الحقوق يدخل في اموال المدين ويكون ضمانا لجميع دائنيه. ووضحت المدعية أن المدعى عليها الشركة (ص) سبق أن ارتبطت مع شركة (س) بعقد مقاولة لغايات انشاء بناء، وأنه على هامش ذلك العقد وتنفيذاً للالتزامات الواردة فيه قام البنك (ع) بناء على طلب شركة (س) بإصدار كفالتين لمصلحة المدعى عليها (ص) على النحو التالي: كفالة حسن أداء بقيمة 20 مليون دولار تقريباً. كفالة الدفعة المقدمة بقيمة 11 مليون دولار تقريباً. وأنه وعلى الرغم من قيام شركة (س) بتنفيذ التزاماتها وتسليم المشروع للمدعى عليها على أن هذه الأخيرة قامت بدون وجه حق -حسب زعم المدعية- بتسييل الكفالتين المشار اليهما من خلال توجيه طلب للبنك مصدر الكفالتين، ومن ثم الاستيلاء على المبلغ المذكور. وبالنتيجة، طالبت المدعية برد قيمة الكفالتين التي استولت عليهما الشركة المدعى عليها لمصلحة شركة (س). وأشارت المحكمة الى أن عقد المقاولة الذي يربط شركة (ص) مع شركة (س) تضمن التزام هذه الأخيرة بإصدار كفالة الدفعة المقدمة وكفالة حسن التنفيذ، كما حددت الاتفاقية نطاق التزامات كل طرف وحقوقه. وأن الاتفاقية تضمنت أن يحال أي خلاف أو نزاع لم يتم حله في غضون أربعين يوماً بعد تقديم اشعار الخلاف سواء تم عقد اجتماع الخلاف أو لم يتم بناءً على طلب أي من الفريقين في غضون عشرة أيام بعد انتهاء فترة الاربعين يوماً أن يحال الى التحكيم وفق الأحكام المنصوص عليها في تفاصيل العقد (الأحكام) أمام هيئة تحكيم تتألف من ثلاثة محكمين واحد يسميه صاحب العمل وآخر يسميه المقاول وثالث يتم تعيينه من قبل المحكمين المعينين وفقاً للأحكام. ويكون مكان التحكيم في الدولة وتكون لغة التحكيم هي اللغة الانجليزية. يتنازل الفريقان عن أي حق في الاستئناف أمام أي محكمة في أي ولاية قضائية بقدر ما يمكن اجراء هذا التنازل بشكل صحيح. كما تضمنت أنه يجب أن تكون قواعد التحكيم وفقاً لقواعد الاونسيترال للتحكيم (UNCITRAL). وبينت المحكمة في حكمها أن المدعية لم تقم دعواها بصفتها الشخصية وانما اقامتها مستعينة بقواعد الدعوى غير المباشرة وفاقاً لأحكام المادتين 366 و367 من القانون المدني وأكدت انها تستهدف من دعواها اعادة المبالغ المدعى بها الى الضمان العام لشركة (س)، لا بل وصرحت انها تقيم الدعوى بالنيابة عن هذه الأخيرة. وأشارت المحكمة أن المشرع الاردني نظم الدعوى غير المباشرة كوسيلة تضمن للدائن حق اقامة الدعوى عن مدينه المهمل قبل مدين هذا الأخير بما يضمن زيادة الضمان العام وتحصيل الحقوق التي يتقاعس المدين المهمل عن اتخاذ ما يلزم لتحصيلها. ومن ثم خلصت الى أنه في ظل هذه المكانة التي أقامت المدعية نفسها فيها، فإن مقتضيات الدعوى المباشرة وفق صريح نص المادة 367 من القانون المدني أن المدعي في الدعوى المباشرة انما يتولى المطالبة بحقوق مدينه نيابةً عنه. وتابعت أنه ولما كان المدعي في ظل الدعوى المباشرة ينوب نيابة قانونية عن مدينه، فإن مؤدى ذلك أنه يحق للمدعى عليه (مدين المدين) أن يتمسك قِبَلَ المدعي بسائر الدفوع القانونية التي يملكها في موجهة المدين. وأسندت رأيها بما ورد على لسان الدكتور عبد الرزاق السنهوري في هذا المقام: “والاثار التي تترتب على الدعوى غير المباشرة تتركز كلها في فكرة أساسية هي نيابة الدائن عن المدين كما سبق القول، والنيابة هنا نيابة قانونية…..” (الدكتور عبد الرزاق السنهوري، الوسيط في شرح القانون المدني، المجلد الثاني، نظرية الالتزام بوجه عام، الاثبات- آثار الالتزام، دار احياء التراث العربي، بيروت، ص 269) وقررت المحكمة نتيجة لذلك أن مفهوم النيابة القانونية المقررة في المواد 108-115 من القانون المدني هي الواجبة الانطباق في العلاقة بين النائب والمدين، ويكون لهذا الأخير التمسك أمام النائب بسائر ما يحيط التزامه من شروط/ أوصاف بمواجهة الأصيل، وهذا بطبيعة الحال ينسحب على شرط التحكيم. ونقلت عن الدكتور فتحي والي قوله بأنه: “اذا حدث حلول في الالتزام فإن الحلول يتضمن حلولاً في شرط التحكيم ولهذا فإنه ان قام شخص من الغير بوفاء الدين وحل محل الدائن المستوفى حقه في دعواه ضد المدين، فإن هذا الغير سواء كان حلوله بنص القانون أو باتفاق بينه وبين الدائن أو المدين يتقيد باتفاق التحكيم بين الدائن والمدين، فيحل محل الدائن في هذا الاتفاق عند رجوعه بالحق على المدين حالّا محل الدائن في حقه.” (الدكتور فتحي والي، قانون التحكيم في النظرية والتطبيق، الطبعة الأولى 2007، منشأة المعارف بالإسكندرية، ص 167-168). كما أوردت على لسان الكاتب ذاته أنه: “وتطبيقاً لذلك حكم بأن شرط التحكيم الوارد في العقد من الباطن المبرم بين المقاول الأصلي والمقاول من الباطن بشأن المنازعات المتعلقة بتنفيذ العقد يمتد الى كل منازعة تتصل بدعوى المطالبة عما تم تنفيذه من الاعمال موضوع العقد ومنها مطالبة المقاول من الباطن المقاول الأصلي بما هو مستحق في ذمته لرب العمل.” (الدكتور فتحي والي، الوسيط في التحكيم الوطني والتجاري الدولي، علماً وعملاً، الجزء الاول، دار النهضة العربية، القاهرة، 2021، ص 292 وما يليها) وأضافت المحكمة على لسان المؤلف ذاته: “لا مشكلة اذا كان رجوع أحد طرفي العقدين على الطرف في العقد الآخر بالدعوى غير المباشرة، وكان العقد الآخر يتضمن شرط تحكيم، إذ عندئذٍ يكون الدائن مستعملاً حق مدينه الناشئ عن عقد يتضمن شرط تحكيم، ويلتزم الدائن بهذا الشرط الذي يقيد حق مدينه.” (الدكتور فتحي والي، الوسيط في التحكيم الوطني والتجاري الدولي، المرجع السابق، ص 317) وبالنتيجة، خلصت المحكمة إلى أنه ولطالما أن المدعية في دعواها تقمصت دور مدينها، وأقامت دعواها نيابة عنه بالاستناد الى أحكام الدعوى المباشرة (بالنيابة عن شركة س) فهي والحالة هذه تكون عرضة للدفوع كافة التي توجه لشركة (س)، ويكون تمسك المدعى عليها بمواجهتها بشرط التحكيم مسلك صحيح فيما لو توافرت شرائط قيام شرط التحكيم.  لقد تضمن حكم المحكمة رداً على سائر دفوع المدعية المتعلقة

Five years on: developments and dispute resolution under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA)

  Overview The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is a free trade agreement between Canada and the European Union, which came into effect in 2017. The agreement aims to deepen the economic relationship between the two regions and facilitate the flow of goods, services, and investments. One of the significant implications of CETA for European businesses is increased market access to Canada and vice-versa. With CETA, European businesses have gained access to a market of over 37 million consumers, providing them with a unique opportunity to expand their operations and increase their exports to Canada. Moreover, CETA eliminates tariffs on a vast majority of goods traded between Canada and the EU, making it easier and more cost-effective for investors. CETA includes provisions for the protection of foreign investment and the resolution of investment disputes, providing European and Canadian businesses with greater legal certainty and protection in Canada and Europe. Additionally, CETA includes provisions to protect intellectual property rights, which is crucial for businesses involved in the development and commercialization of innovative products and services. The agreement also includes provisions for the mutual recognition of professional qualifications, which allows professionals from the EU to provide services in Canada and vice versa without the need for additional certifications. This makes it easier for European businesses to transfer employees to Canada and for Canadian businesses to hire European professionals. CETA also includes provisions for the facilitation of trade in services, including financial services, telecommunications, and e-commerce. This makes it easier for European businesses to offer their services in Canada and access Canadian customers, while also facilitating cross-border trade in services. However, there are still some challenges that European businesses face when doing business in Canada. The regulatory environment in Canada can be complex, and businesses must navigate a range of federal, provincial, and territorial regulations. Moreover, Canadian labor laws and environmental regulations can be more stringent than those in the EU, and businesses must be aware of these differences when entering the Canadian market. Despite these challenges, CETA provides European businesses with a valuable opportunity to expand their operations in Canada and access a large and growing market. As the Canadian economy continues to grow and diversify, the opportunities for European businesses in Canada are likely to increase. CETA represents a significant step forward in the relationship between Canada and the European Union and provides European businesses with increased market access and greater legal certainty in Canada. As the agreement continues to be implemented and its benefits become more apparent, it is likely to have a positive impact on European businesses and their ability to do business in Canada. Dispute resolution under CETA CETA establishes a permanent Tribunal of fifteen Members to hear claims for violations of investment protection standards established in the agreement. The EU and Canada will appoint Members of the Tribunal who are highly qualified and beyond reproach in terms of ethics. This has been dubbed the ‘Investment Court System’. Divisions of the Tribunal, consisting of three Members, will hear each particular case. This structure ensures that each case is thoroughly reviewed and evaluated by a group of experts. The CETA text now follows the EU’s new approach, as set out in the recently concluded EU-Vietnam FTA and the EU’s TTIP proposal. This approach emphasizes the importance of a competent and impartial tribunal to resolve investment disputes and protect the interests of both investors and states. Decisions of the Tribunal are appealable before an Appellate Tribunal. Decision No. 001/2021 of the CETA Joint Committee, dated 29 January 2021, sets out the administrative and organizational matters regarding the functioning of the Appellate Tribunal established under CETA. The Decision sets out the procedures for the appointment of members of the Appellate Tribunal, including their terms of office, eligibility criteria, and conditions for removal. It also establishes the rules for the functioning of the Appellate Tribunal, including the procedures for the initiation of appeals, the conduct of appeal proceedings, and the rules for the dissemination of information to the public. The Decision is an important step in ensuring the effective functioning of the appellate mechanism established under CETA. By establishing clear and detailed administrative and organizational rules, the decision contributes to the predictability, consistency, and transparency of the dispute resolution process under CETA. Utility of the Investment Court System The dispute resolution mechanism under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) provides European and Canadian investors with a means to protect their investments in Canada and Europe respectively. It is not possible to determine definitively whether the Investment Court System under CETA is faster or more cost-efficient than other investment dispute resolution mechanisms such as ICSID or PCA arbitration procedures, as this can vary on a case-by-case basis and depends on a number of factors. However, proponents of the Investment Court System argue that it offers a more streamlined and efficient process compared to other investment dispute resolution mechanisms. For example, the system is designed to have a smaller pool of highly qualified arbitrators, which could result in faster decision-making and a more consistent body of case law. Additionally, the system incorporates measures aimed at reducing the costs of arbitration, such as provisions for the consolidation of claims and a streamlined procedure for document production. Ultimately, the speed and cost-efficiency of the Investment Court System will depend on a number of factors, including the complexity of the dispute, the legal issues at stake, and the parties involved. Moreover, by providing a transparent and predictable framework for the resolution of investment disputes, the mechanism can contribute to a more stable investment environment and increase investor confidence, which in turn could make financing and insurance more readily available to investors. By creating a fair and impartial forum for the resolution of disputes, the mechanism can also reduce the risks associated with investing for European investors in Canada and vice-versa, which could make it more attractive to potential investors. Top developments since CETA was signed in 2017 Since the Canada-European

UAE High Court finds ICC ADGM office subjects Abu Dhabi seated ICC arbitrations to the jurisdiction of the ADGM Courts

  Brief Two parties to a construction contract agreed that all disputes would be subject to the International Chamber of Commerce Rules of Arbitration and for the arbitration to be seated in Abu Dhabi. The arbitration award was challenged by one of the parties before the Abu Dhabi Appeals Court. The Abu Dhabi Appeals Court found it had no jurisdiction and that jurisdiction was exclusive to the Abu Dhabi Global Market Courts. The reasoning of the Abu Dhabi Appeals Court was that: the arbitration was subject to the ICC Rules which resulted in, the arbitration proceedings being subject to the ICC representative office in the ADGM, and as the ICC representative office in the ADGM is considered an ADGM establishment, then the ADGM Courts have exclusive jurisdiction to consider challenges to the arbitration award. Petition The party petitioning the Abu Dhabi Cassation Court argued substantively presenting a myriad of grounds addressing the UAE Federal Arbitration Law, the ADGM respective laws, and the New York Convention. The arguments of the petitioner were as follows: That the parties expressly agreed to settle disputes between them in accordance with the ICC Rules, provided that the procedures and place of arbitration are in the Emirate of Abu Dhabi, without allocating the spatial scope in the Emirate of Abu Dhabi, and that applying the ICC Rules does not make that ICC or any of its branches a place for arbitration because it violates the contract between the two parties. That the ICC having a representative office in the ADGM does not mean that the two parties have agreed that the seat of arbitration is this representative office as they agreed in the contract to subject arbitration and its procedures to the laws of the UAE, they also agreed that the Emirate of Abu Dhabi as the place for arbitration, and in accordance with Articles 1 and 2/1 of UAE Federal Arbitration Law No. 6/2018, the Abu Dhabi Appeals Court is the competent forum to adjudicate challenges against the arbitration award. That it was not mentioned in the arbitration award that it was issued by the ICC in its capacity as a local court in the ADGM or in its capacity as a local court in the Emirate of Abu Dhabi, and neither in the award nor in the contract was there agreement to apply the rules of the ADGM or the Arbitration Regulations of the ADGM. That the arbitration award was not issued in the name of The Ruler of the Emirate (Abu Dhabi) as required by Article 13/2 of ADGM Law No. 4/2013, and it was not issued by judges as required by Article 13/1 of said ADGM Law, nor by the representative office of the ICC located in the ADGM, but rather by the Secretariat of the International Court of Arbitration affiliated with the ICC, nor did the ICC representative office in the ADGM notify the parties of the arbitration award, but the notification was rather conducted by the Secretariat. That assuming that the ADGM Courts are competent to hear challenges against the arbitration award, this causes a judicial vacuum because the Court of First Instance in the ADGM has no jurisdiction to hear the case and its jurisdiction is exclusively in accordance with the text of Article 7/13 of ADGM No. 4/2013. That neither the ADGM, nor any of the ADGM authorities, nor any of the ADGM establishments were party to the arbitration, and the contract was not concluded, completed, or executed, in whole or in part, and the incident was not completed in whole or in part in the ADGM, and the award is not an appeal against a decision or a procedure issued by any of the ADGM authorities. That the ADGM Courts apply the civil and commercial laws of the ADGM, specifically English laws, not the laws of the UAE, and the Abu Dhabi Appeals Court judgment violated the New York Convention, which requires under its Article Three the recognitions of arbitral awards as binding and enforceable in accordance with the rules of procedure of the territory where the award is relied upon, and para. (e) of Article V of the Convention prohibited those territories from refusing to recognize a foreign award or refusing to enforce it, and thus the Convention linked foreign awards to the legal system of the country that it was issued and in respect of the invalidity of arbitration awards and as the award is issued in the Emirate of Abu Dhabi, the Abu Dhabi Courts have exclusive jurisdiction to hear challenges against an award issued in the Emirate of Abu Dhabi and outside the ADGM. Disposition of the Abu Dhabi Cassation Court The petitioner filed their petition before the Abu Dhabi Cassation Court on 29 December 2022 and the Court issued its judgment on 18 January 2023 rejecting the petition and upholding the finding of the Abu Dhabi Appeals Court on the following legislative grounds: Article 18/1 of the UAE Federal Arbitration Law applies which states that: “The jurisdiction to examine the arbitration matters referred by the present Law to the competent Court shall be according to the applicable procedural laws in the State, and they shall, solely, have the power until all arbitration proceedings are terminated.” Article 1 of the UAE Federal Arbitration Law defines the ‘Court’ as: “The federal or local Appeal Court agreed by all Parties or which the Arbitration is carried out within its area of jurisdiction.” Article 1 of ADGM Law No. 4/2013 defines ‘ADGM Establishments’ as: “Any company, branch, representative office, establishment entity, or project registered or licensed to operate or conduct any activity within the ADGM by any of the ADGM authorities according to the provisions of this law or the ADGM regulations or the executive resolutions including the licensed financial ADGM Establishments.” Article 13/1 of ADGM Law No. 4/2013 states that: “The ADGM Courts shall be of two degrees, first instance (formed of a single judge) and appeal (formed of three judges). Without prejudice to

Corporate income tax disputes under the new UAE Federal Decree-Law No. 47/2022 on the Taxation of Corporations and Businesses

  The new UAE law on taxation of corporate (“Corporate Tax Law”) and business income was promulgated on 03 October 2022 and applies to tax periods commencing on or after 01 June 2023. The Corporate Tax Law does not define its own dispute procedure system. The Corporate Tax Law is subject to the Tax Procedures Law (Federal Decree-Law No. 7/2017). The Tax Procedures Law regulates tax disputes through a five-tiered system: reconsiderations with the Federal Tax Authority, objections with the tax disputes resolution committees, and litigation before the Federal Primary Court, the Federal Appeals Court, and the Federal Supreme Court. Here, we look at the top five prior tax-related judgments that would carry over to corporate tax disputes under the Corporate Tax Law. No tax penalties on payment delays caused by the tax authority. The Federal Primary Court has ruled that: the obligations of the taxpayer to make tax payments on time and the procedural nature of the law are undeniable, however, that does not produce an effect unless the way to implement the procedures is in accordance with what falls within the obligations of the Federal Tax Authority, and if this is prevented by the Tax Authority without cause on the part of the taxpayer, there is no liability on the taxpayer that requires the imposition of penalties. No tax penalties for re-submission of correct tax returns. The Federal Supreme Court has ruled that: “…it is decided that tax procedures are not an end in themselves, but rather a means to achieve the goal of the lawgiver in collecting the legally due tax. Allegedly, the tax returns made under the wrong procedure that were subsequently corrected were not taken into account. Rather, the FTA’s right to collect the fine decided by the legislator on the wrong procedure only recedes, without this right going beyond that by imposing other fines for a tax collected on the date specified by the law, even under the aforementioned procedure.” No disputes available without tax or penalty liabilities: The Federal Supreme Court has found that private clarifications are not disputable decisions until such clarification results in actual tax or penalties being applied to the disputing taxpayer. In other words, if a decision by the Federal Tax Authority does not create a tax or penalty liability, it may not be disputed under the Tax Procedures Law. No joint liability for tax evasion without laws validating the conviction. The Federal Supreme Court overturned a judgment against a party found to be an accomplice to a tax evasion crime on the basis that joint liability requires explicit provisioning in the law: “…the Appeals Court’s finding that the mere presence of the goods in the second accused’s warehouse is considered participation with the first accused in evading the tax as stipulated in the laws of the State, without indicating the laws criminalizing the act and validating conviction, stigmatizes the judgment for insufficient causation, and breaches the [second accused’s] right of defense, which requires it to be quashed.” Time limits related to tax disputes. The Federal Supreme Court ruled that the time limits related to tax disputes do not necessarily commence when notification is issued – but rather require evidence of the receipt and fulfillment of knowledge of the taxpayer of that decision and its contents. Takeaway As the Federal Courts consider a wider array of complex tax disputes, taxpayers would benefit from the guidance of the courts on general matters, such as those listed above – but also on more industry-specific matters such as those affecting the insurance industry, manufacturing, construction, and real estate. As taxpayers begin planning for compliance with the Corporate Tax Law, it is necessary to understand the position of the courts and tax dispute resolution committees on substantive and technical issues.

Supreme Court of Canada rules inoperability of arbitration agreement in insolvency proceedings (Peace River v Petrowest)

This analysis was first published on Lexis®PSL on 07 December 2022 and can befound here. On 10 November 2022, in a unanimous decision, the Supreme Court of Canada rendered its ruling in the matter of Peace River Hydro Partners v Petrowest Corp. The decision provides clarification on when insolvency proceedings will render an arbitration agreement inoperative in the context of a court-ordered receivership. The Supreme Court of Canada refused to stay the civil lawsuit of a receiver despite the existence of numerous arbitration agreements. This is significant as (in the current economic climate) a commercial party may find itself subject to a dispute vis-à-vis an insolvent or bankrupt counterparty with an arbitration agreement governing the debt claim. Peace River Hydro Partners v Petrowest Corp, 2022 SCC 41 Author: Mahmoud Abuwasel Require assistance? Contact us Abu Dhabi:            +971 600 521 607Dubai (DIFC):        +971 600 521 607Melbourne:            +61 3 8691 3150Toronto:                  +1 416 645 6426 See locations.

Dubai High Court denies enforcement of arbitration award against foreign party (Article III of the New York Convention)

  The Dubai Cassation Court, the highest tier of court litigation in the Emirate of Dubai, recently rendered judgment rejecting enforcement of an arbitration award against a foreign award debtor on the basis that the debtor does not have a domicile in the United Arab Emirates. Furthermore, the Dubai Cassation Court provided an interpretation of Article III of the New York Convention in finding that its purpose is that enforcement of an award should be conducted “…in accordance with the rules of procedures applicable in the territory of enforcement with the adoption of the easiest procedures, and the exclusion of the more onerous procedures…”. The Dubai Cassation Court did not adopt the latter part of Article III which continues to state, “than are imposed on the recognition or enforcement of domestic arbitral awards”, developing an interpretation of Article III to consider its second sentence requiring application of easy and non-onerous procedural rules, instead of requiring application of procedural rules that are not more onerous than those that apply to the enforcement of domestic arbitration awards. The arbitration award: The arbitration award was issued by the London Court of International Arbitration. The award debtor is a foreign entity and has no domicile in the United Arab Emirates. However, the award debtor owned shares in companies established and domiciled in the United Arab Emirates. The award creditor applied for recognition and enforcement of the award before the Dubai Courts against the shares of the United Arab Emirates companies owned by the foreign award debtor. The enforcement judge rejected the application on the basis that the Dubai Courts have no jurisdiction to enforce an arbitration award against a foreign party. The award creditor challenged the finding through the courts, up to and in petitioning the Dubai Cassation Court. The Dubai Cassation Court considered the following arguments made by the award creditor: Pursuant to the principle of voluntary – legislative – compliance with the accession of the United Arab Emirates and the United Kingdom to the Convention on the Recognition of Foreign Arbitral Awards (New York Convention) ratified by Federal Decree No. 43/2006, the rules of jurisdiction contained in the Federal Civil Procedures Law do not apply to the enforcement of foreign arbitral awards, considering that both the United Kingdom and the United Arab Emirates have acceded to the Convention on the Recognition of Foreign Arbitral Awards of 1958 (New York Convention) and implicitly accepted their jurisdiction to consider the application for the enforcement of foreign arbitral awards and are obligated to recognize and order their enforcement in accordance with the terms contained in the Convention. It is evidenced within the contract in dispute and within the arbitration award that the award debtor is the owner of shares of two companies registered in the United Arab Emirates. The parties to the arbitration agreed to the sale and purchase of the shares owned by the award debtor in those two companies. The legislator deviated from the general principle of domicile jurisdiction, allowing the creditors of a shareholder in a limited liability company to execute against the shares of a debtor shareholder by selling the shares and collecting the debts from the proceeds of the sale in accordance with Article 20 of the Federal Commercial Companies Law. The Dubai Cassation Court rejected the petition for the following reasons: The text of Article III of the New York Convention of 1958 indicates that enforcement takes place in accordance with the rules of procedures followed in the territory of enforcement, with the adoption of the easiest procedures and the exclusion of the more onerous procedures. This matter is not limited to the general procedural law, which is the Federal Civil Procedures Law and its executive regulations, but rather includes any procedural rules for litigation and the implementation of its provisions contained in any other law that regulates these procedures, and to say otherwise is allocation without provision. And that it is established – in the jurisprudence of the Dubai Cassation Court – that the issue of sovereign or qualitative jurisdiction is one of the issues related to public policy and is considered to exist in any litigation and always before the court, which the court must address it on its own accord, even if none of the litigants raise the issue. It is also decided – in the jurisprudence of the Dubai Cassation Court – that the company of any kind – with the exception of the joint venture company – has a legal personality and a financial liability independent of the liabilities of its shareholders, and it has the capacity to sue as a plaintiff or defendant, independently of its shareholders. The jurisdiction of the Dubai Courts in the enforcement of the arbitration award is not affected by the request to enforce against the shares of the award debtor in the two companies domiciled in Dubai (in the United Arab Emirates) as the arbitral award required to be enforced does not include an order against the two companies, in addition to the absence of any other rulings against them, and therefore they are not considered a party to the instrument (the arbitration award) required to be enforced. For the competence of the enforcement judge in the Dubai Courts to recognize (apply exequatur) and enforce a foreign award, the domicile of the award debtor against whom enforcement is requested must be within the State jurisdiction of the Dubai Courts whilst in this case the award debtor is domiciled in a foreign State. Article III of the New York Convention The Dubai Cassation Court cited part of Article III and supplemented its quotation with an interpretive addition to the provision while omitting the application of the latter part of Article III. Article III of the New York Convention states: “Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall

Arbitration in Europe: new rules on third-party litigation funding

  On September 13, 2022, the European Parliament passed a resolution to propose a directive (the “Directive”) on the regulation of third-party litigation funding. Although not obvious at first sight, the Directive would also apply to arbitration procedures or other alternative dispute resolution mechanisms.[1] The European Parliament recognizes that, although third-party litigation funding is “virtually non-existent in Europe, it is a booming phenomenon in investment arbitration that multiplies the number and the volume of claims of private investors against States”[2]. As it expects the practice of third-party litigation funding to expand in Europe—considering how it is already prevalent in the United States and many Commonwealth countries—the European Parliament is concerned about the potential for abuse by litigation funders, should the status quo of a regulatory vacuum be maintained. Indeed, litigation funders may be tempted to put their own economic interest over the interest of claimants and thus assume undue control over the funded proceedings. Notwithstanding those concerns, the European Parliament notes that third-party litigation funding, if properly regulated, could enhance access to justice for claimants. Hence, the proposed Directive establishes common minimum standards on third-party litigation funding for Member States that wish to permit the practice within their territory. The Directive mandates the creation of an independent public supervisory authority responsible for overseeing the authorisation of litigation funders and monitoring of their activities. Litigation funders would thus have to demonstrate annually that they possess adequate financial resources to pursue their activities and to observe a fiduciary duty of care[3] towards the claimants they are funding. The supervisory authority of a Member State would also be empowered to investigate complaints regarding litigation funders and to share information with the supervisory authorities of other Member States. The Directive also sets minimum requirements with regards to third-party funding agreements. For instance, such agreements would have to be written in one of the official languages of the Member State in which the claimant and intended beneficiaries are resident.[4] Also, any agreement that would entitle the litigation funder to a share of over 40% of the total award would, absent exceptional circumstances, be deemed to null and void. Finally, unilateral termination of funding agreements by the litigation funder would also be prohibited. The Directive further seeks to give courts and arbitral bodies more power by requiring claimants to inform the adjudicational authority of the existence of a third-party funding agreement. Such transparency would allow a tribunal to ensure that litigation funders do not get an unreasonable share of an award, to impose penalties for not respecting the Directive and to hold litigation funders responsible for adverse costs arising from unsuccessful litigation. It is to be noted that the Directive is still in the proposal stage, and the rules relayed above must go through the European parliamentary process and implementation at the national level by each Member State before becoming law. Nonetheless, such rules go hand in hand with arbitration rules that are already in place on a global scale. Indeed, the International Chamber of Commerce’s Arbitration Rules, the International Centre for Dispute Resolution’s International Arbitration Rules, and most recently the International Centre for Settlement of Investment Disputes’ Arbitration Rules, already provide for the obligation to disclose to the tribunal any funding arrangement involving a non-party to a proceeding.[5] Given the Comprehensive Economic and Trade Agreement (CETA) in place between Canada and the European Union, and considering how CETA potentially allows for a degree of investor-state dispute settlement through arbitration, the Directive’s solidification into law would provide for an interesting playing field where Canadian and European investors would have an enhanced financial ability to seek compensation.[6] Author: Martin Aquilina [1] In the Directive, “proceedings” is described as including “any voluntary arbitration procedure or alternative dispute resolution mechanism, through which redress before a court or administrative authority in the Union is sought concerning a dispute” and “court or administrative authority” is described as “a competent court, administrative authority, arbitral body or other body tasked with adjudicating on proceedings, in accordance with national law” [2] Paragraph F of the recitals of the European Parliament resolution of 13 September 2022. [3] Although the Directive specifically provides for a “fiduciary duty of care”, it is interesting to note that the French text of the Directive uses the term devoir de loyauté (duty of loyalty). The ambit of the former is of course much wider than that of the latter. [4] “intended beneficiary” here means a person who is entitled to receive a share of an award in proceedings and whose interests in the proceedings are represented by the funded claimant or a qualified entity (meaning an organisation representing consumers’ interests (and designated as such under Directive (EU) 2020/1828)) bringing the action as a claimant party on that person’s behalf. [5] See article 11(7) of the ICC Arbitration Rules 2021 and article 14(7) of the ICDR International Arbitration Rules (2021 edition) and Rule 14 of the ICSID Arbitration Rules (July 2022 edition). [6] CETA entered into force provisionally on September 21, 2017, but its provisions on investor-state dispute settlement only come into force when all EU Member States have completed their ratification process. To date, CETA remains to be ratified by 11 Member States (Belgium, Bulgaria, Cyprus, France, Germany, Greece, Hungary, Ireland, Italy, Poland and Slovenia).  

Landmark Ontario Appeals judgment in construction dispute permits rescission of surety bond

  There has been a recent change in the way surety bonds will be treated in the construction industry as a result of the Ontario Court of Appeal decision in Urban Mechanical Contracting Ltd. et al v. Zurich Insurance Company Ltd., 2022 ONCA 589 (“Urban”).  The decision makes it possible for a surety to rescind a bond agreement that was based on fraud or misrepresentation and collusion, even if the result would harm innocent third parties making claims against the bonds.  The ruling stated that the issue of rescission should be decided by considering all the facts and circumstances of a particular matter. Surety bonds are used primarily in the construction industry to protect an owner from the failure of a contractor to meet their mutually agreed upon result in a mutually agreed upon time frame.  It is not uncommon for a general contractor to hire multiple sub-contractors to complete one large job.  Problems often arise when a sub-contractor has difficulties performing their part of the work causing delays all the way down the chain of production and ultimately resulting in a job that is not completely satisfactory or timely. A construction surety bond redistributes the risk so that the immediate burden of a failure of one party to perform falls on the surety.  However, unlike when a claim is made against an insurance policy, a loss that is paid for by the surety bond is fully recoverable from the principal (or the person whose obligation is guaranteed). Rescission is an equitable remedy that is sometimes used in contract matters.  It is provided to a party to a contract that has been wrongfully induced into entering the contract and will void the contract and treat it as if it was never made. The idea is that the parties will be restored to the position they were in prior to entering the contract.  It is available to parties to a contract that was made because of a misrepresentation of a material fact.  In essence, a false statement about a material fact was made by one party to the other to induce them to enter into the contract. Urban was an Ontario Court of Appeals decision involving the development of a patient care tower for St. Michael’s Hospital in which Bondfield Construction Company Limited (“Bondfield”) was hired as the construction contractor.  The appellants in the matter are a group of subcontractors (the “Trades”) hired by Bondfield and the project’s lender Bank of Montreal.  Zurich Insurance Company Ltd. (“Zurich”), the surety that issued the bonds in connection with the project, was the respondent in the matter. Zurich alleged that prior to issuing the bonds in question, it found evidence that fraud was utilized to allow Bondfield to secure the contract for the construction project and therefore stopped payment to the Trades under the payment bond and sought an action for rescission due to fraud.  In turn, the Trades sought a declaration that the payment bond could not be rescinded as it would interfere with their rights as innocent third parties.  Bank of Montreal also sought a declaration that the performance bond could not be rescinded. The Trades argued that their statutory rights under the Construction Lien Act could not be undermined by equitable remedies such as rescission, but Zurich argued that the Trades were potentially parties to the fraud thereby spoiling their rights under the Construction Lien Act. The appellants further argued that rescission is not available when the rights of innocent parties could be negatively impacted. The Court of Appeal ruled that the impossibility of restoring parties to their pre-contract position when third-parties have an interest in the property surrounding the contract and the adverse effect on third parties when rescission is grated are not an absolute bar to rescission and whether a court may order a rescission remedy depends on the facts and circumstances of the particular case and more specifically, a court should be more likely to do so when there has been fraud rather than innocent misrepresentation.  Zurich was allowed to continue seeking rescission as a remedy and its issuance will be determined by the trial judge. The result of Urban is something that those in the construction industry should pay close attention to.  It has cleared the way for sureties to pursue the rescission of bonds by alleging there was a material misrepresentation in the bonded contractor’s disclosures.

UAE Federal Court rules no tax penalties on payment delays caused by the tax authority

  Brief It was evidenced before the Federal Primary Court that the taxpayer had informed the Federal Tax Authority of an obstacle in the online tax filing portal that prevented the taxpayer from being able to file their tax returns. The taxpayer continuously requested resolve of the issues since early 2018 until mid-2021. The issue was finally resolved by the Tax Authority in 2021 and the taxpayer was able to file their returns and make tax payments after that date. The Federal Tax Authority applied penalties retrospectively on the taxpayer for (i) late filing of tax returns and (ii) late payment of taxes. Arguments The taxpayer argued that Article 25(1)(i) permits the application of penalties in case the “…taxable person fails to settle the tax defined as the payable tax in the tax return that has been submitted or the tax assessment notified thereto within the period set forth under the tax law”. And since the payable tax never manifested because of the inability to file a tax return, nor by way of an audit, no tax had become payable. The taxpayer argued that the Payment User Guide of November 2018 indicates that the filing of tax returns and payment of taxes are sequential procedures. In that payment of the tax is a subsequent stage to accepting the tax return. That is only after accepting the tax return, the taxpayer must pay the tax due, otherwise the Federal Tax Authority may implement penalties. However, where the taxpayer does not have the opportunity to submit the tax return due to the fault of the Authority, without cause on the part of the taxpayer, the subsequent stage of paying the tax cannot be triggered. In other words, the unencumbered submission of the tax return is a pre-condition for payment of the tax. Judgment The Federal Primary Court ruled that: the obligations of the taxpayer to make tax payments on time and the procedural nature of the law are undeniable, however, that does not produce an effect unless the way to implement the procedures is in accordance with what falls within the obligations of the Federal Tax Authority, and if this is prevented by the Tax Authority without cause on the part of the taxpayer, there is no liability on the taxpayer that requires the imposition of penalties. Wasel & Wasel was counsel on this matter.

Canada orders divestment of Chinese foreign investors in Canadian critical mineral companies

  Decision On 02 November 2022, the Honorable François-Philippe Champagne, Minister of Innovation, Science and Industry, confirmed the decision by the Government of Canada ordering the divestiture of investments by three Chinese foreign investors as follows: Sinomine (Hong Kong) Rare Metals Resources Co., Limited is required to divest itself of its investment in Power Metals Corp. Chengze Lithium International Limited is required to divest itself of its investment in Lithium Chile Inc. Zangge Mining Investment (Chengdu) Co., Ltd. is required to divest itself of its investment in Ultra Lithium Inc. The statement by the Minister confirms that the divestiture order is in relation to investments that threaten national security and critical minerals supply chains in accordance with the Investment Canada Act. A number of investments in Canadian companies engaged in the critical minerals sector, including lithium, are under review. The decision was made in support of advice of critical minerals subject matter experts, Canada’s security and intelligence community, and other government partners. The divestiture order was made in accordance with section 25.4(1) of the Investment Canada Act which states: “…the Governor in Council may, by order, within the prescribed period, take any measures in respect of the investment that he or she considers advisable to protect national security, including (a) directing the non-Canadian not to implement the investment; (b) authorizing the investment on condition that the non-Canadian (i) give any written undertakings to Her Majesty in right of Canada relating to the investment that the Governor in Council considers necessary in the circumstances, or (ii) implement the investment on the terms and conditions contained in the order; or (c) requiring the non-Canadian to divest themselves of control of the Canadian business or of their investment in the entity.” Investment protections The Government of Canada has investment protection treaties with both the Hong Kong Special Administrative Region and the People’s Republic of China. Both treaties with Hong Kong and the PRC provide substantive, although modifications in scope and language may be seen in the different instruments. However, most of the standard principal protections available include: national treatment and most-favored-nation treatment whereby Canada cannot discriminate against foreign investors in favor of domestic investors or investors from another country; the requirement that Canada provides the minimum standard of treatment in accordance with customary international law for foreign investments; fair and equitable treatment provisions, which (as guided by findings of tribunals) include requirements for full protection and security; due process and access to justice; adherence to investors’ legitimate expectations; no coercion or harassment by the organs of the state; offering a stable and predictable legal framework; transparency of the legal framework; and no arbitrary or discriminatory treatment; and no direct or indirect expropriation that prevents Canada from taking property belonging to a foreign investor directly through mandatory transfer or physical seizure, or indirectly through regulatory measures, prevention of contractual rights, or other actions – including methods of ‘creeping’ expropriation where the expropriation occurs gradually. Both treaties provision for general compensation for foreign investors in breach of the treaties. Actions over security concerns in the Canada – Hong Kong investment treaty The Canada – Hong Kong investment treaty provides exceptions for matters of security but is generally limited to the Government of Canada “…taking an action that it considers necessary to protect its essential security interests: (i) relating to the traffic in arms, ammunition and implements of war and to such traffic and transactions in other goods, materials, services and technology undertaken directly or indirectly for the purpose of supplying a military or other security establishment, (ii) taken in time of war or other emergency in international relations, (iii) relating to the implementation of policies or international agreements respecting the non-proliferation of nuclear weapons or other nuclear explosive devices;” A special annexure was made to the Canada – Hong Kong investment treaty to expand exceptions on future matters to account for social services, rights of aboriginal peoples, economically disadvantaged minorities, government securities, maritime cabotage, fishing, telecommunications services, and the services sector. The maritime-related exceptions consider mineral resources of the continental shelf of Canada, worded within the ambit of the right to operate sea, air, or other transport services within a particular territory as follows: “maritime cabotage, which means (a) the transportation of either goods or passengers by ship between points in the area of Canada or above the continental shelf of Canada, either directly or by way of a place outside Canada; but with respect to waters above the continental shelf of Canada, the transportation of either goods or passengers only in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of the continental shelf of Canada; and (b) the engaging by ship in any other marine activity of a commercial nature in the area of Canada and, with respect to waters above the continental shelf, in such other marine activities of a commercial nature that are in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of the continental shelf of Canada…” Actions over security concerns in the Canada – PRC investment treaty The Canada – Hong Kong investment treaty provides exceptions for matters of security that the Government of Canada can trigger in cases of: “(i) any existing non-conforming measures maintained within the territory of a Contracting Party; and (ii) any measure maintained or adopted after the date of entry into force of this Agreement that, at the time of sale or other disposition of a government’s equity interests in, or the assets of, an existing state enterprise or an existing governmental entity, prohibits or imposes limitations on the ownership or control of equity interests or assets or imposes nationality requirements relating to senior management or members of the board of directors;” The schedule to the Canada – Hong Kong investment treaty applies exceptions as those applied in the Canada – Peru investment treaty, requiring specific reservations in certain sectors including telecommunications, government finance, fishing, social services, and transportation. Recent dispute with

Significant judgment by Dubai Court orders payment of damages in cryptocurrency instead of fiat currency

  In a dispute over investment in Dash cryptocurrency, one of the more well-known and established altcoin cryptocurrencies, the Dubai Primary Court ordered payment to the plaintiff in Dash (as opposed to in Dirhams, US Dollars, or UK Pounds). This is one of the first cases in the UAE where the court orders compensation in cryptocurrency as opposed to fiat currency providing substantial considerations for how disputes over cryptocurrency transactions should be managed. Background The plaintiff purchased 6000 Dash from the defendant for the amount of USD 540,000, on the promise that the defendant would invest the cryptocurrency for a return of 3% per week. The defendant failed to pay the plaintiff the investment return, or the principal investment, despite multiple demands by the plaintiff. The plaintiff sued before the Dubai Primary Court for USD 1,009,800 being the value of the Dash coins at the time plus the agreed upon returns of 3% per week. Dubai Primary Court judgment The Court ruled in favor of the plaintiff awarding the 6000 Dash instead of the amount of USD 1,009,800 claimed by the plaintiff. Although the transaction agreement was evidenced and established, the Court did not award a monetary value in fiat currency on the basis that the plaintiff did not evidence the true market value of the Dash that was being claimed. This is the first known case where a UAE court awards damages in cryptocurrency only, without identifying any fiat currency as a value to such cryptocurrency in the award. The Court ordered in its judgment disposition: “Obligating the defendant to return to the plaintiff an amount of (6000 Dash Cryptocurrency) to the electronic address of the plaintiff’s wallet.” The Court based its reasoning on the Federal Commercial Transactions Law as follows: “The meaning of the provisions of Articles 76, 77, 88, 90 of the Commercial Transactions Law is that if the debt arises from a commercial business and relates to a sum of money of known amount at the time the obligation arises and the debtor is late in paying it, then the creditor has the right to demand interest on it as compensation for delay, and this interest applies from the maturity date of this debt, and is calculated according to the price agreed upon in the contract concluded between the two parties. If no interest rate is specified in the contract, it is calculated according to the prevailing market price at the time of dealing, provided that it does not exceed 12% annually until the full payment. … The contract concluded between the two parties did not include a reference to any website whereby the unit price of the [crypto] currency will be calculated and therefore the benefits resulting from it cannot be estimated due to the lack of knowledge of its price in the market as it changes daily.” Takeaway This is a significant judgment for those engaged in the digital asset economy in the UAE to account for; (i) at the time of contracting; (ii) at the time a dispute arises; (iii) and in strategizing the most appropriate relief to seek from the courts or arbitration tribunals to maximize return. Should parties wish to recover their cryptocurrency in fiat currency at the time of making a claim, it is crucial to: At the time of contracting specify how the value of cryptocurrency will be determined and based on which references. Post-contracting, at the time of dispute, disputants should provide an expert/technical report on the true market value of the cryptocurrency using credible reference points. On the other hand, should a plaintiff expect the value of the cryptocurrency to rise, this judgment provides grounds to make claims and request compensation in the cryptocurrency that was traded/invested as opposed to a monetary value. If the price of the cryptocurrency is expected to increase, it may be beneficial to request the courts to grant relief in the form of the cryptocurrency as opposed to the monetary value. This is because if the court awards relief in the monetary value of the cryptocurrency (as opposed to awarding the cryptocurrency itself) the value of the fiat currency in the judgment would be set at the date of the judgment and generally remain so during appeal and enforcement. Appeals and enforcement could take months or years. During which time the value of the cryptocurrency could increase in folds. However, if the judgment awards a party in cryptocurrency instead of fiat currency, that cryptocurrency value would continue to increase as the parties go through appeal and enforcement procedures. And the winning party would be able to enforce at the then-current price of the cryptocurrency (at enforcement), as opposed to the price at the time of the initial judgment.

Highlights of the recently published ICSID 2022 Annual Report

  The International Centre for Settlement of Investment Disputes of the World Bank (ICSID) published its 2022 Annual Report on 14 October 2022. Highlights of the report include: 346 cases administered by ICSID, marking the largest number of cases ever administered at ICSID in a single fiscal year. A record 77 concluded cases, reflecting ICSID’s ongoing efforts to reduce the time of cases. Individuals of 42 nationalities were represented amongst the appointments made in the fiscal year. This is the second largest number of different nationalities appointed in a single year at ICSID. 45% of first-time appointees in FY2022 were women and 25% involved nationals of low- or middle-income economies. ( Other notable report highlights in the Report are as follows: ICSID administered 18 cases governed by non-ICSID rules in FY2022 with the majority (13 cases) applying the arbitration rules of the United Nations Commission on International Trade Law (UNCITRAL). (p. 14 of the Report) Distribution of cases registered in FY2022 by region: 22%: South America 20%: Eastern Europe and Central Asia 12%: Central America and the Caribbean 12%: Middle East and North Africa 12%: Sub-Saharan Africa 8%: South and East Asia and the Pacific 8&: Western Europe 6%: North America (Canada, Mexico, and the US) (p. 15 of the Report) Basis of consent to establish jurisdiction in FY2022: 56%: Bilateral Investment Treaty 13%: Investment Contract between the Investor and the Host-State 11%: Energy Charter Treaty 4%: U.S.-Mexico-Canada Agreement 4%: North American Free Trade Agreement 4%: Investment Law of the Host State 2%: Dominican Republic-United States-Central America Free Trade Agreement 2%: Colombia-El Salvador, Guatemala and Honduras Free Trade Agreement 2%: Central America-Panama Trade Promotion Agreement (p. 15 of the Report) Distribution of cases registered in FY2022 by economic sector: 24%: Electric Power and Other Energy 22%: Oil, Gas and Mining 12%: Construction 10%: Information and Communication 8%: Other Industry 8%: Water, Sanitation and Flood Protection 6%: Finance 6%: Transportation (p. 16 of the Report) Top three distribution of cases registered in FY2022 by country: Peru: 5 Romania: 4 Spain: 3 (p. 16 of the Report) 91% of hearings or sessions were conducted remotely in cases administered by ICSID during FY2022 using ICSID audio/video conferencing services. (p. 18 of the Report) 77 proceedings concluded in FY2022: 56 original arbitrations, 20 post-award proceedings, and one conciliation proceeding. (p. 19 of the Report) Of the 56 original arbitration proceedings that concluded in FY2022, 27 were settled or otherwise discontinued, and 29 were decided by the tribunal. (p. 19 of the Report) Outcomes of arbitration proceedings under the ICSID Convention and Additional Facility in FY2022: 25%: Award upholding claims in part or in full. 23%: Proceeding discontinued at the request of both parties. 14%: Award dismissing all claims. 14%: Proceeding discontinued at the request of one party. 11%: Award declining jurisdiction. 9%: Proceeding discontinued for lack of payment of the required advances. 2%: Settlement agreement embodied in an award at parties’ request. 2%: Award deciding that the claims are manifestly without legal merit. (p. 19 of the Report) Link to the Report in English:

UAE Appeals Court invalidates cryptocurrency agreement and defines Ponzi scheme in ‘OneCoin’ transaction dispute

  In a rare judgment, the Appeals Court of Ras Al-Khaimah (UAE) applies the elements of contract formation of the Federal Civil Transactions Law to invalidate a cryptocurrency transaction – finding that the object of the agreement did not fulfill the requirements of being “possible, specified or specifiable, and negotiable”. Furthermore, the Appeals Court classified the transaction as a Ponzi scheme and provided a definition thereof falling within the general understanding of a Ponzi scheme, but with a wider net that requires persons engaged in the digital asset economy in the UAE to be better attuned with the recent rules and regulation surrounding digital assets. Also notable, the transaction in dispute involved the infamous OneCoin. Claim The claim alleged that the defendant (Seller) sold to the plaintiff (Buyer) 40,000 units of OneCoin at a value of AED 100,000 and despite the Buyer’s payment for the exchange, the Seller did not deliver the tokens/units. The Seller sued the Buyer before the Primary Court of Ras Al-Khaimah. Primary Court technical analysis and judgment The Primary Court adopted the following technical provisions/understandings: An encrypted digital currency is a virtual currency or a digital asset based on a network and is distributed across a large number of systems known as “Blockchain.” Due to this decentralized structure, an encrypted digital currency is considered not subject to the control of governments, authorities, and centralization. Bitcoin, Litecoin, and Ether are among the most popular of these currencies and in order to be converted into cash, a cryptocurrency must be traded on a special exchange. To verify the actual value of that currency, a variety of sources on the internet were surveyed but no exchange trading OneCoin was found, and based on the information available on the internet, the OneCoin exchange known as “XCoinx” was closed without any notice and therefore the current and past value of this coin cannot be confirmed. This Primary Court ruled to rescind the sale contract and obligated the Seller to return the purchase price of AED 100,000 and pay AED 10,000 in comprehensive compensation to the Buyer. Appeals Court procedures The Seller appealed the Primary Court judgment before the Appeals Court arguing that the sale is valid as it was conducted through a “Deal Shaker” platform, and it does not violate the law nor public policy. The fact of the agreement – as argued by the Seller in appeal – between the two parties is that the Seller would maintain the cryptocurrency in accordance with the Seller’s terms and conditions as listed online and release it for transfer to the Buyer between certain periods of time. The Seller argued that they had explained to the Buyer the rules of the exchange and the possibilities of profit and loss and the risks that might occur to the Buyer. The Seller alleged that they had informed the Buyer of the period to acquire the OneCoin units but did not receive any confirmation from the Buyer. The Buyer refuted any communication to acquire the units during that period had occurred. Appeals Court judgment The Appeals Court rejected the Seller’s appeal on the following reasoning. The Court found that OneCoin (and its related companies and its founder Ruja Ignatova), as being the object of the underlying agreement, was deemed associated with fraud that tempts investors to join a Ponzi scheme. The Court defined a Ponzi scheme as “…a form of defrauding investors by paying dividends to early investors based on money deposited by newer investors. This scheme leads its victims to believe that profits come from sales of products or other investment means and remain unaware of the fact that other investors are the source of funding without real investment in valid means.” The Court concluded that the sold currency and its circulation constitutes fraud, which makes it an invalid transaction and a violation of law and public policy. Consequentially – the Court found – the agreement does not fulfill the necessary elements for the formation of a contract under Article 129(b) of the Civil Transactions Law that is: “The object of the contract must be something possible, specified or specifiable, and negotiable.” Which invalidates the contract and renders it void ab initio and restores the contracting parties to the state prior to the coming into effect of the agreement, with the obligation on the Seller to refund the moneys paid to the Buyer. Takeaway The majority of cryptocurrencies derive their value and increase thereof from their supply and demand on exchanges, so within the wide-encompassing definition of the Ponzi scheme by the Appeals Court, there is a risk of cryptocurrency transactions falling afoul of Article 129(b). In the past few years, the UAE Central Bank, the Securities and Commodities Authority, the ADGM and the DIFC have set out in regulating digital assets with instruments such as: Central Bank Circular No. 6/2020: Stored Value Facilities (SVF) Regulation Securities and Commodities Authority Decision No. 23/RM/2020: Concerning Crypto Assets Activities Regulation DIFC Dubai Financial Services Authority: Consultation Paper No. 143 – Regulation of Crypto Tokens Abu Dhabi Global Markets Guidance – Regulation of Virtual Asset Activities in ADGM (VER04.280922) The regulations set forth, those above and others in the digital asset industry, provide for various forms of licensing depending on the activity in the digital asset economy. Failing to operate within the confines of the rules and regulations, or license accordingly, may lead to the invalidation of digital asset transactions on the premise that they do not conform with Article 129(b) of the Civil Transactions Law, or be considered a Ponzi Scheme within the definition adopted by the Appeals Court. And for buyers who may have suffered from questionable transactions, the Appeals Court judgment provides a sign of relief in the technical competency of the UAE courts to deduce and adjudicate digital asset disputes.

Canada trade arbitration disputes arising from the European energy crisis

  In 2020, Canada was the tenth largest partner of the EU for goods exports and the 16th largest partner for EU goods imports. The EU-Canada Comprehensive Economic and Trade Agreement (CETA) entered into force provisionally on 21 September 2017. As a modern and progressive EU trade agreement, CETA provides EU firms with more and better business opportunities in Canada, supports employment in Europe, and protects consumers and the environment, allowing businesses and entrepreneurs of all sizes to benefit from its improved market access. Recently, Europe’s energy-intensive companies have begun to close their doors in response to high energy prices. As a result of high gas and power prices, dozens of plants across a wide range of industries, including steel, aluminum, fertilisers, and the power industry, have had to close up shop. A factory in Europe has been closed by the world’s second-largest steel producer, due to rising gas and energy prices in the region. The energy crisis has led to the closure of several European stainless steel mills, glass manufacturers, and other industrial operations. Europe – UNIDROIT As a non-binding codification of international contract law, the European rooted Unidroit Principles of International Commercial Contracts serve as a basis for international contract law as a whole. The Principles provide a balanced set of rules tailored to the special requirements of modern international commercial practice, and they are designed to be utilized throughout the world regardless of the legal traditions and economic and political conditions of the countries in which they are to be applied. When unforeseeable events “fundamentally alter[r] the equilibrium of the contract,” a party may request a renegotiation of the contract under the hardship provisions in the Unidroit Principles of International Commercial Contracts. Arbitral tribunals applying Unidroit Principles may terminate or adjust the contract in order to restore equilibrium if renegotiation fails. Similar hardship provisions are found in other soft law instruments, most notably the Principles of European Contract Law, which includes a provision on change of circumstances. Parties to an international commercial arbitration may also agree on the UNIDROIT Principles as the applicable law, rather than a specific domestic law or the CISG. Canada – doctrine of frustration Common law legal principles have long emphasized the doctrine of frustration. A party to a contract may not be obligated to meet their contractual obligations if circumstances change – without their own fault – that prevent them from performing the contract. It is possible that frustration could be applied to any contract, in contrast to force majeure clauses. As a result of common law doctrine of frustration, parties can terminate contracts when an event occurs which prevents the performance of a contractual obligation from being performed due to the fact that its performance would result in a thing radically different from the contract’s expectations. In the absence of unforeseen circumstances, any party would be unjustly held responsible for their obligations under the contract, based on the doctrine. In the case of a contract to supply raw materials, the suspension of businesses due to exponential energy prices may frustrate the contract. In Naylor Group Inc. v Ellis-Don Construction Ltd, the Supreme Court of Canada provided guidance on what may constitute frustration describing it as “when a situation has arisen for which the parties made no provision in the contract and performance of the contract becomes ‘a thing radically different from that which was undertaken by the contract’”. Arbitration to resolve disputes For Canadian businesses engaged in transactions with European counterparts, being able to resolve a dispute via arbitration provides the advantage of potentially more reliable enforcement and collection procedures. This is particularly advantageous when the debtor does not have assets in Canada. The first step would be to review contracts and purchase orders (or any other instruments) to see if there is an arbitration dispute resolution clause. An arbitration tribunal generally applies the doctrine of frustration narrowly, but in summary, frustration would require substantiation of the following elements: It is necessary for the frustrating circumstances or events to arise or occur after the contract has been entered into; As a result of the frustrating circumstances or events, the performance of the contract is impossible, illegal, or radically different from what was anticipated when the contract was signed; If the applicable frustrating circumstances or events were caused by the actions or omissions of the party seeking to rely on the doctrine, the doctrine will not apply, or if the relevant risks have already been addressed and allocated by the contract terms.

Dubai Court rejects Bitcoin claim lacking proof of crypto-wallet ownership (and solutions for digital asset disputes in the UAE)

  Dubai Court rejects claim of loss of 608 Bitcoins for lack of evidence of crypto-wallet ownership. Dubai Primary Court rules: “…the plaintiff had transferred the encrypted currency “Bitcoin” to the defendant…did not indicate how to prove the ownership of the account to the defendant, noting that by referring to the page shown in the advisory report taken from the “blockchain” website, it became clear to the court that they are symbols…” In brief, the Court found that cryptocurrency claims require a plaintiff to evidence crypto-wallet ownership by the alleged debtor. Background The plaintiff met the defendant in Dubai, and accepted making an investment in Bitcoin in return for “fantastic financial returns”. In January 2019, the plaintiff transferred 608 Bitcoins to the defendant. The Bitcoins were transferred to the crypto wallet of an investment company in accordance with the terms of the agreement between the plaintiff and the defendant. It was also agreed that after 15 February 2019, even if the project is not complete for any reason, the defendant and the company that owns the crypto wallet must return the Bitcoins to the plaintiff. On 15 March 2019, the plaintiff demanded from the defendant and the investment company the return of the Bitcoins delivered to them. The demand to return the Bitcoins was rejected by the defendant, and the defendant “disappeared”. Claim and ruling The plaintiff sued the defendant before the Dubai Primary Court claiming return of the 608 Bitcoins or their equivalent market value. The plaintiff filed an expert report which evidenced the validity of the transfer by referring to a blockchain records website (public ledger) showing that the Bitcoins were held by a particular crypto wallet. The Court commented that the expert report did not evidence that the crypto wallet belonged to the defendant nor the investment company as the only identification to the wallet’s ownership were “symbols”. By “symbols” the Court is referring to the crypto wallet identification number. In essence, the Dubai Court set a threshold for evidence of token possession by a wrongdoer. Proof of identity of crypto wallets is an ongoing issue in digital asset disputes. But solutions and remedies are available for claimants. Solutions for digital asset disputes Digital asset disputes – particularly involving the misappropriation of tokens – have resulted in innovative solutions in different jurisdictions using common law injunctive processes. Mareva injunctions A Mareva injunction is a worldwide freezing and asset disclosure order. It extends to all a defendant’s assets worldwide, limiting the defendant from utilizing those assets except for regulatory purposes (i.e., paying employment salaries) unless consent is granted by the plaintiff. And requires the defendant to disclose its worldwide assets over a certain threshold value (i.e., over USD 10,000 or USD 50,000). The Hong Kong High Court recently granted such remedy over Bitcoins that were fraudulently misappropriated in Nico Constantijn Antonius Samara v Stive Jean Paul Dan, freezing up to USD 2.6 million of the defendant’s assets (including any digital assets). Norwich orders Norwich orders – or Norwich Pharmacal orders – are injunctive orders obtained against an innocent third party in order to identify a wrongdoer or details related to a potential wrongdoer. A Norwich order compels an innocent third party (such as a cryptocurrency exchange) to disclose relevant information to a plaintiff/applicant. In digital asset disputes, these orders have been used to compel exchanges to disclose details related to crypto wallets and digital assets. The English High Court recently issued a Norwich order in Mr Dollar Bill Limited v Persons Unknown and Others – notably, the Norwich order was issued against cryptocurrency exchanges outside England compelling them to assist in identifying what had happened to the tokens in question. Anton Piller orders One increasing trend is the reliance on Anton Piller orders to access the digital assets of a defendant and investigate records that could prove the transfer of the tokens. Anton Piller orders are a common law remedy which compels a defendant to permit a plaintiff to enter its property to search for and seize evidence and records, including electronic data and equipment. An Anton Piller order in a cryptocurrency dispute was recently issued by the Ontario Superior Court of Justice in Cicada 137 LLC v. Medjedovic in relation to an alleged theft of CAD 15 million in digital assets from the plaintiff’s crypto wallet. Solutions in the UAE The UAE has two common law court systems: the Abu Dhabi Global Market Courts (ADGM) and the Dubai International Financial Centre Courts (DIFC). Both the ADGM and the DIFC have authority to grant Mareva injunctions, and the DIFC has historically granted several Mareva injunctions against parties in the UAE and otherwise. The ADGM and DIFC may also consider applications for Norwich orders to compel third parties to provide evidence in support of a dispute. Anton Piller orders before the ADGM and DIFC courts are possible, but there are no records of execution of such orders to date. Digital asset disputes in the UAE According to ‘The 2021 Geography of Cryptocurrency Report’ by Chainalysis, the UAE hosted USD 25.5 billion worth of cryptocurrency transactions between July 2020 and June 2021. With a significant value of cryptocurrency transactions taking place in the UAE, plaintiffs need to carefully strategize any dispute process and make use of all domestic and cross-border remedies. Relying on archaic means of pursuing claims in an industry that is incrementally complex may not be fruitful – and instead innovative tactics and strategies must be put in place. The UAE has six court systems – each with their own utility – and the UAE has agreements and treaties with various international dispute resolution forums and courts, that claimants need to consider when pursuing digital asset claims.

UAE Ministry of Justice confirms enforcement of English Court judgments on principle of reciprocity

  On 13 September 2022, Judge Abdul Rahman Murad Al-Blooshi, Director of International Cooperation Department of the Ministry of Justice, issued a communique to His Excellency Tarish Eid Al-Mansoori, Director General of the Dubai Courts, confirming the enforcement of judgments issued by English Courts based on the principle of reciprocity. Extracts from the communique read as follows: “…based on the Treaty between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates on Judicial Assistance in Civil and Commercial Matters, and the desire to strengthen fruitful cooperation in the legal and judicial field; Whereas, the aforementioned Treaty does not provide for enforcement of foreign judgments, and states that the judgments should be enforced according to the relevant applicable mechanism set forth in the local laws of both countries; Whereas, Article (85) of the Executive Regulation of the Civil Procedures Law, as amended in 2020, stipulates that judgments and orders issued in a foreign country may be enforced in the State under the same conditions prescribed in the law of that country, and the legislator does not require an agreement for judicial cooperation to enforce foreign judgments, and such judgments may be enforced in the State according to the principle of reciprocity; and Whereas, the principle has been considered by the English Courts upon previous enforcement of a judgment issued by Dubai Courts by virtue of a final judgment issued by the High Court of the United Kingdom in Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB), which constitutes a legal precedent and a principle binding on all English Courts according to their judicial system, Therefore, we kindly request you to take the relevant legal actions regarding any requests for enforcement of judgments and orders issued by the English Court, in accordance with the laws in force in both countries, as a confirmation of the principle of reciprocity initiated by the English Courts and assurance of its continuity between the English Courts and the UAE Courts.” Lenkor considered whether enforcement of a Dubai Court judgment would be in breach of English public policy on the argued grounds that “it is contrary to public policy to permit the indirect enforcement (via a guarantee) of a contractual obligation that is illegal”. The Lenkor court rejected that the underlying transaction must be considered as in breach of English public policy – but rather it is the judgment that must be found to breach English public policy. The court found that there “is no suggestion that the public policy which arises under the law of Dubai precludes the enforcement of the statutory cause of action. As the judge said, if that point was to be taken, it should have been taken in Dubai”. And further that the “degree of connection between the claim and the illegality must also be balanced against the strong public policy in favour of finality, and in favour of enforceability”. The communique by the Ministry of Justice confirming the enforcement of judgments issued by English Courts based on the principle of reciprocity provides confidence and judicial stability for creditors looking to enforce English Court judgments against debtors in the UAE.

UAE Supreme Court orders default termination clauses only exercisable by beneficial party

  Brief In June 2022 the UAE Federal Supreme Court issued a judgment finding that default termination clauses cannot be exercised by both (or all) parties to a contract — if that termination clause inures to the benefit of one of the parties with a standing claim. The reasoning rendered by the Supreme Court is where a termination clause is a default termination clause yet inures to the benefit of one party but not the other and is read to intend protecting the interest of that beneficial party, then it is that beneficial party who must explicitly trigger the default termination clause otherwise the contract remains intact. Ruling The Federal Supreme Court ordered that: “It is decided that if the contract does not contain an express condition, it is terminated if its elements are fulfilled. The court is not necessarily bound to terminate the contract based on an implicit termination condition established for the benefit of the applicant in the event the other party fails to implement their mutual obligation. The court may compel the debtor to implement their obligation immediately or within a specified time. And the court may reject the request for termination if it appears to it from the facts of the situation that the debtor is no longer in breach of implementing their obligation, by preventing the issuance of the judgment for termination, by implementing his commitment before or during the consideration of the case and until before the issuance of the final judgment in it. And there would be nothing in this delay that would harm the applicant requesting the termination or anyone else, and there would be no principle in this regard to the extent of the defendant’s obligation that he had not fulfilled, or the value of the obligation that the applicant fulfilled in accordance with the terms of the contract. Rather, the principle is what will be the state of affairs when the case is judged and until the final ruling is issued.” Facts In 2008, the applicant (seller) sold to the respondent (buyer) an apartment of which the buyer paid the deposit of about 15% for. The buyer failed to pay the rest of the installments despite the completion of the apartment. The seller requested the buyer take possession of the apartment. The buyer rejected without justification and issued a termination notice to the seller. The seller sued for the remaining amounts due for the development of the apartment plus interest. The primary and appeals courts rejected the claim on the basis that the contract had been terminated. Ultimately the seller petitioned the Federal Supreme Court for review. References The Supreme Court relied on Articles 267 and 272 of the Civil Transactions Law that state: 267: If a contract is valid and binding, none of the contracting parties may revoke, modify, or terminate it except by mutual consent, order of the court or a law provision. 272: (1) In bilateral contracts, if one of the parties does not perform his contractual obligations, the other party may, after serving a formal notification to the debtor, demand the performance of the contract or its termination. (2) The judge may order the debtor immediate performance of the contract or grant him specified additional time, as he may order termination with damages, in any case, if deemed justified. The Supreme Court deduced the penalty and termination clauses of the contract in dispute which read as follows: Clause 5: In the event of the buyer’s failure to pay three consecutive or non-consecutive payments, a notice of default for week shall be issued. In the event that the overdue amounts are paid during this period [the week], the buyer will pay a delay fine of 10% of the overdue amounts. Clause 6: If the buyer does not pay during the above-mentioned period, which is the week for payment of the overdue amounts, the contract is terminated without referring to the buyer, and the seller has the right to sell the apartment to another person, and the buyer deducts 30% of the total paid contract. Reasoning The trial courts, primary and appeals, had considered that the contract is deemed automatically terminated pursuant to clauses 5 and 6. The Federal Supreme Court overturned the lower court judgments and found that the option of the express termination clause is in the interest of the seller and not for the buyer. The Supreme Court found that the termination notice issued by the buyer is invalid as the termination clause is not in his interest and the buyer does not have the right to terminate the contract unilaterally. And the seller had insisted on executing the contract of sale of the apartment and requested that the buyer be obligated to pay the rest of the price and take possession of the apartment. The reasoning rendered by the Supreme Court is where a termination clause is a default termination clause yet inures to the benefit of one party but not the other and is read to intend protecting the interest of that beneficial party, then it is that beneficial party who must explicitly trigger the default termination clause otherwise the contract remains intact. And the courts may not terminate the contract without the request of the beneficial party to the termination clause – and must grant requests for performance of the contract.

Canada-EU Trade Agreement discussions on expropriation and treatment (FET) of investors

  The Comprehensive Economic and Trade Agreement (CETA) between Canada and the 28 European Union countries has been ratified by 15 member states as of February 2022 and is expected to conclude ratification in due course. The CETA will establish a permanent tribunal of fifteen members to hear investor claims. Each particular case would be heard by three of the fifteen members. This new dispute resolution forum is a divergence from the standard investor-State arbitration dispute settlement mechanism. On 29 August 2022, the European Commission issued a statement on clarifications discussed with Germany regarding investment protection in the context of the CETA agreement as follows: “The EU and Canada are trusted and like-minded partners that share the same goals when it comes to promoting open, sustainable and fair trade. Our EU-Canada Comprehensive Economic and Trade Agreement (CETA) aims to support our common objective of climate protection. In this context, the European Commission has engaged in constructive discussions with the German Federal Government to prepare a text that clarifies certain provisions in CETA. The result of these technical discussions is a more precise definition of the concepts of ‘indirect expropriation’ and ‘fair and equitable treatment’ of investors. The aim is to ensure that the parties can regulate in the framework of climate, energy and health policies, inter alia, to achieve legitimate public objectives, while at the same time preventing the misuse of the investor to State dispute settlement mechanism by investors.  The new draft text agreed by the Commission and the Federal Government provides legal certainty and it now needs to be supported by all other EU Member States. Once this is the case, we will consult our Canadian partners so that the new definitions can be adopted by the CETA Joint Committee as soon as possible.” The current consolidated CETA text addresses expropriation in Article 8.12(1) prohibits expropriation unless such expropriation is (a) for a public purpose, (b) under due process of law, (c) is a non-discriminatory manner, and (d) on payment of prompt, adequate and effective compensation. Article 8.10(1) of the current consolidated CETA text obligates member states to accord to investors fair and equitable treatment and full protection and security covering general requirements as is generally seen in investment treaties including access to justice, due process, transparency, no manifest arbitrariness, no targeted discrimination, no abusive treatment of investors, and so on. The outcome of the discussions between the European Commission and Germany will provide more precise definitions of the concepts of ‘indirect expropriation’ and ‘fair and equitable treatment’ of investors to ensure that the parties can regulate in the framework of climate, energy and health policies, inter alia, to achieve legitimate public objectives, while at the same time preventing the misuse of the investor to State dispute settlement mechanism by investors.

2022 ICSID Arbitration Rules: Seven key takeaways

  On 01 July 2022, the 2022 ICSID Rules and Regulations for resolving international investment disputes came into effect. This is the first amendment to the ICSID Arbitration Rules since 2006 aimed at modernizing the ICSID procedures. Here we cover seven key takeaways: Key steps in ICSID procedures will require mandated case management conferences with precise deadlines to make procedures more efficient. Tribunals must convene one or more case management conferences to identify uncontested facts, clarify and narrow the issues in dispute, or address any other procedural or substantive issue related to the resolution of the dispute. The Rules now provide for expedited arbitration procedures reducing case time in half and permitting a tribunal of one or three arbitrators. Any third-party funding arrangements must be disclosed to the Secretary-General upon registration of the request for arbitration, or immediately upon concluding a third-party funding arrangement after registration. The 2022 ICSID Institution Rules now require that at the request for arbitration filed with the Secretary-General include a description of the investment and of its ownership and control. Previously, no requirement was in place to describe the control of the investment. This creates a new consideration for claimants with complex investment structures.  Consent to publish awards, orders, and submissions is now the default position unless one of the parties expressly objects to such publication within 60 days after the dispatch of the document. There is now an express provision governing security for costs under Rule 53 of the new ICSID Arbitration Rules which provides a procedural timetable for security for costs applications and the considerations that must be made by the tribunal.  ICSID has also introduced its 2022 ICSID Mediation Rules for investment-related disputes and its 2022 ICSID Fact-Finding Rules. The new Mediation Rules provide for an avenue for parties to resort to mediation under ICSID with or without a prior party agreement. The new Fact-Finding Rules offer parties the option to constitute a committee to inquire into and report on relevant circumstances in the pre-dispute phase and provide an impartial assessment of facts arising in the dispute between the parties.

UAE Supreme Court: Commercial agency de-registration requires enforcement of foreign judgment

  Brief In July of 2022, the Supreme Court adjudicated whether a bankruptcy judgment in a foreign jurisdiction provided sufficient grounds for the Ministry of Economy in the United Arab Emirates to de-register a company from the commercial agency register. Commercial agency registrations Foreign companies entering the UAE market from abroad can do so through commercial agency structures. These relationships are registered with the Ministry of Economy and are distinct from general unregistered contractual relations, distributorships, or otherwise. Commercial agencies are governed by a specific law (Commercial Agencies Law No. 18/1981) and grant the agent protections that are to an extent safeguarded by the Ministry of Economy. The Ministry of Economy registers commercial agencies and de-registration of agencies requires the consent of the parties (agent and principal), or court order, or a decision by a special Commercial Agencies Committee. The legislative purpose of restricting deregistration is to protect the agent. Ergo to ensure the efforts and investments of the agent made in developing a market for a principal are not abused by the principal through abrupt terminations. Commercial agency litigation Disputes between the agent and principal are generally governed by the contractual relationship between the parties. However, disputes related to registrations or the general status of a commercial agency registration arise from decisions issued by the Ministry of Economy and are subject to the jurisdiction of the Federal Courts (as Federal administrative disputes). Case facts An Emirati company was registered with the Ministry of Economy as the commercial agent for three Japanese companies. In 2019, two of the companies filed a joint request with the Ministry of Economy to de-register the third company from the commercial agency register on the basis that the third company had been liquidated since 2005. The Commercial Agencies Committee accepted the request and de-registered the third company. The agent was not informed of the de-registration decision issued by the Committee. The agent argued before the Federal Courts that it had no knowledge of the liquidation of the Japanese company since 2005 and that in 2015 the agent was informed that the apparent restructuring was due to a change of name, and the agency relationship continued between the parties. In 2021 the agent challenged the decision of the Ministry of Economy (the Commercial Agencies Committee) before the Federal Primary Court. The agent argued that the liquidation order of the courts of Japan has no effect on the rights of the agent (including his registration rights) because (i) the agent was not a party/litigant in the liquidation proceedings before the courts of Japan, and (ii) the agent was not informed or notified of the decision thereafter. Supreme Court decision The Supreme Court reasoned that: “Article 16 of the Commercial Agencies Law No. 18 of 1981 and its amendments states that every commercial agency registration, amendment, or cancellation from the commercial agencies register must be accompanied by the documents supporting it. The commercial agency [principal] of the appellant has been judicially liquidated by a ruling issued by one of the courts of Japan, and therefore the effects of this ruling before the courts of the United Arab Emirates do not apply until after the competent [UAE] judge issues the order to implement [the foreign judgment] pursuant to Article 85 of the Executive Regulations of the Civil Procedures Law. In the appealed ruling, the court ruled on the legality of the Ministry’s decision to de-register the foreign company from the commercial agencies register based on a foreign judgment that was not confirmed domestically, which renders the judgment defective and must be rescinded.” Article 85 of the Civil Procedures Law Regulations The decision by the Supreme Court is that foreign orders and judgments that may affect the status of the registration of a commercial agency in the UAE cannot be presented to the Ministry of Economy to action without first obtaining recognition by the UAE courts. Article 85 of the Civil Procedures Law Regulations governs the procedure for enforcement of foreign judgments, orders, and bonds. When an application to the court is filed for enforcement of a foreign judgment, such enforcement order may be appealed by any concerned persons. In this situation, agents would have the opportunity to sound or present any reservations or contentions to foreign orders that may affect their commercial agency relationship and registration. Author: Mahmoud Abuwasel

UAE Cassation Court addresses whether silence deemed acceptance in arbitration agreements

  Silence may be deemed consent Article 135 of the Civil Code (Law No. 5/1985) states that (i) no statement may be attributed to a silent person. However, circumstantial silence shall constitute acceptance. And (ii) silence shall amount to acceptance namely in case of previous dealings between the contracting parties that are met by the offer made or where the offer is made to the benefit or the offeree. The DIFC Court of First Instance addressed the meaning of Article 135 in DAS Real Estate Owned and represented by Mussabeh Salem Mussabeh Humaid AlMuhairi v First Abu Dhabi Bank Pjsc DIFC 002/2016 where Chief Justice Sir David Steel noted that: “In the event of silence the secondary question arises as to whether there was a “need” to speak…Silence in the face of “need” amounts to “acceptance”. Indeed Article 135(2) identifies the specific example of acceptance of an offer in the context of prior dealing between the parties. The commentary on the UAE Civil Code by James Whelan gives the example of a person who “has the right to prohibit the act by his words is regarded as consenting to it by his deliberately abstaining from saying anything.” In brief, silence may be considered acceptance under Article 135 of the Civil Code in certain circumstances. Silence in arbitration agreements Arbitration agreements have a high threshold in the UAE with respect to evident acceptance by the parties, such as in relation to capacity, authority to represent a principal, arbitration agreements in separate documents to the substantive agreement, or in reference to standard forms (such as the FIDIC forms of contract). Article 7(2)(a) of the Federal Arbitration Law (No. 6/2018) states that: “The requirement that an Arbitration Agreement be in writing is met in the following cases…If it is contained in a document signed by the Parties or mentioned in an exchange of letters or other means of written communication or made by an electronic communication according to the applicable rules in the State regarding the electronic transactions.” Article 7(2)(a) provides room for interpretation with respect to the nuances that arise in exchanges of electronic communication to conclude an arbitration agreement. And the UAE Federal Supreme Court has previously confirmed that an arbitration agreement can be concluded through written electronic communication or through instant messaging. Consequently, this raises questions as to whether an offer to bind a dispute to arbitration issued by some form of manuscript or – particularly – electronic communication may fall within the parameters of Article 135 of the Civil Code where silence is deemed acceptance. On 17 May 2022, in a matter involving a payment order and whether the courts had jurisdiction vis-a-vis a purported arbitration agreement, the Abu Dhabi Cassation Court explicitly addressed silence in arbitration agreement offers in finding that: “It is not permissible to derive proof of an arbitration agreement from the mere silence of one of the parties regarding the response to the arbitration offer from the other party, or the implementation of what was presented to it by this party related to the invitation to conclude a specific contract as long as it is not proven that the party to whom this offer is addressed has accepted the writing of arbitration while accepting the contract. It is also not permissible to deduce the proof of arbitration also from the mere work between the two parties to arbitrate in certain contracts that the arbitration will apply to another contract between them that did not provide for arbitration since the agreement on arbitration is not presumed and may not be implicitly drawn.” Author: Mahmoud Abuwasel

UAE Supreme Court orders cancellation of tax penalties for re-submission of returns

  Facts The taxpayer submitted tax returns for the prescribed tax periods as of January 2018, and these returns included supplies related to real estate owned individually to the taxpayer, as well as real estate owned in partnership with another person. The taxpayer’s partner was not added to the tax registration from the beginning due to the absence of his name as an owner in all real estate. The taxpayer registered a new account with the partner on the directives of the Federal Tax Authority during an audit and re-filed the tax returns under the new account. Penalties The FTA applied late payment penalties to the taxpayer as the new account required re-submission of the returns that had been filed previously by the taxpayer under the original account. The FTA considered that the new submissions were the correct submissions as the original submissions were not correct in form and procedure because the account did not include the partner. The FTA applied the late payment penalties to the new submissions tracing back to January 2018. Supreme Court order The taxpayer challenged this up to the Federal Supreme Court. The Supreme Court found that the reopening of the new account did not result in damages to the State funds because the taxpayer had originally submitted and paid all tax returns, including the real estate in the partnership, on the legally prescribed dates. The procedural deficiency did not manifest a circumstance where the payments had not been made. In reasoning, the Supreme Court stated: “Since this argument is in order, it is decided that tax procedures are not an end in themselves, but rather a means to achieve the goal of the lawgiver in collecting the legally due tax. Allegedly, the tax returns made under the wrong procedure that were subsequently corrected were not taken into account. Rather, the FTA’s right to collect the fine decided by the legislator on the wrong procedure only recedes, without this right going beyond that by imposing other fines for a tax collected on the date specified by the law, even under the aforementioned procedure.” Significance This judgment reassures the application of justice and equity in tax dispute proceedings before the Federal Courts of the UAE. Taxpayers must seek learned and practiced counsel when faced with a tax dispute. Author: Mahmoud Abuwasel

UAE Federal Supreme Court weighs in on liability of shareholders in bankruptcy proceedings

  Facts and Trial A company operating from 2001 till 2012 was in strong financial standing. After 2012, the company faced financial difficulties and lawsuits and by 2020 had encumbered debts amounting to almost AED 20 million. The Federal trial courts (Primary and Appeal) assessed that the company was trading in a commercial business by nature, and it was declared bankrupt as a result of its failure to pay its commercial debts and the disruption of its business and lack of confidence in it in the commercial market, which indicates its troubled financial position, with which its credit position is shaken. The creditors petitioned for the bankruptcy of the two shareholders as well. The Federal trial courts rejected the bankruptcy of the two shareholders on the finding that the bankruptcy conditions did not apply to them according to the text of Article 142 of Federal Decree-Law No. 9/2016 on Bankruptcy. The creditors challenged the position of the Federal trial courts before the Federal Supreme Court on the basis that Article 142 states that if there is an order for bankruptcy of a company and liquidation of its assets, then all the joint partners of the company shall be declared bankrupt. Supreme Court Assessment The Supreme Court rejected the petition on the grounds that the company whose bankruptcy was declared is a free zone company that has a separate legal personality, and its financial liability is independent of the liabilities of its shareholders, and the responsibility of each of the shareholders is determined with his share in the company both in relation to each other and to third parties. The Supreme Court clarified that shareholders could be found accountable in their personal capacity for debts within the limits of any issued personal guarantees. If the shareholders are not joint partners nor are responsible for the company debts with their personal assets, they are not considered merchants, just as their participation in the formation of the company and their rights to profit share from the company is not considered a commercial act. The Supreme Court confirmed that Article 142 applies to ‘merchants’ and/or joint partners in unlimited liability companies (or civil companies) but does not extend to shareholders in a limited liability company. The Court clarified that Article 142 should be read in line with Article 2(4) which states the provisions of Bankruptcy Law applies to licensed civil companies of professional nature. Although not referenced by the Court, a ‘merchant’ is defined in Article 11 of the Commercial Transactions Law as every person performing, in his own name and for his own account, acts of commerce, and every company exercising a commercial activity or adopting one of the forms prescribed in the Commercial Companies Law, even if such activity is a civil activity. Supreme Court Holding Whereas the text of Articles 2(4) and 142 of Federal Decree-Law No. 9 of 2016 regarding bankruptcy states that its provisions apply only to the person who is approved by the description of the merchant in its legal sense, that he was conducting business in his name and in a professional and exploitative manner, and that the description of the merchant applies to a general partner in the company that conducts trade as a profession, and it was decided and based on what was done by the judiciary of this court that declaring bankruptcy is a penalty that is limited to merchants who stop paying their commercial debts as a result of their financial position insolvency, and that the description of the merchant is only valid on the person who practices trade as a professional, and the capacity of a merchant in commercial business cannot be a presumption, and the burden of proof falls on the one claiming it, and that the bankruptcy of the company entails the bankruptcy of each joint partner in it, with the effect that the joint partner in a commercial company is considered a trader that permits his bankruptcy. Significance The clarification by the Supreme Court on the reading of Article 142 of the Bankruptcy Law comes at a significant time on the heels of the recent Marka ruling by the Dubai Courts in adjudicating the bankruptcy of Marka Holdings PJSC. The Dubai Primary Court had ordered that the managers and directors of Marka be found personally liable for the debts of Marka to amount of approximately AED 450 million. The Primary Court, in the Marka case, based its finding on Article 144 of the Bankruptcy Law which permits the Court to compel any or all board members or managers to pay all or some of the debts of the company if the assets of the company are not sufficient to meet at least twenty percent of its debts. Article 144 reads in a sequential manner to Article 142 – with Article 142 discussing liability of partners. It is noteworthy now the Supreme Court highlights that the reading of Article 142 must be in conjecture with Article 2(4) which applies the Bankruptcy Law to licensed civil companies and does not extend to shareholders in companies protected with limited liability provisions. Author: Mahmoud Abuwasel

High Judicial Commission issues first UAE stare decisis order: concept of absolute invalidity, doctrine of apparent circumstances, and standard of good faith

  Brief In December 2019, the UAE formed a high Commission to establish unifying precedents across the various judicial systems of the UAE. The UAE has six judicial systems: Federal, Abu Dhabi, Dubai, Ras Al-Khaimah, the Dubai International Financial Centre, and the Abu Dhabi Global Market. Historically there have been conflicting positions between the judicial authorities. The power of stare decisis has been granted to the decisions of this high Commission by law. Even where a high court of the UAE (including the Federal Supreme Court) rules in contradiction to an order of the high Commission, standing is granted to appeal against that contradictory ruling. Whether the DIFC and/or ADGM courts are subject to the jurisdiction of the high Commission is unclear. This high Commission issued its first decision in July of 2021 addressing a few issues. Of those issues, we discuss here, are the concept of absolute invalidity of contracts, the doctrine of apparent circumstances, and the standard of good faith. The high Commission acknowledges that the doctrine of apparent circumstances is not stipulated in UAE legislation neither implicitly nor explicitly. And with this acknowledgment made clear by the high Commission, it has issued what may be considered as the UAE’s first stare decisis order — the first case law binding precedent in the UAE enshrining a nationwide binding doctrine that is prior non-existent in statutory nor customary law. The Commission The ‘Commission for the Unification of Conflicting Judicial Principles’ was established on 19 December 2019 by Federal Law No. 10/2019 on the Regulation of Judicial Relationships between Federal and Local Judicial Authorities. The Commission is headed by the President of the Federal Supreme Court and paneled by judges from each of the Federal Supreme Court and the Courts of Cassation of the UAE. Res judicata effect and stare decisis status The decisions of the Commission have res judicata effect and stare decisis status. All Federal and local judicial authorities must abide by the principles decided by the Commission. Violation by any judgment of a lower trial court to any Commission principle is grounds for appeal. If the violation is by the highest court of a respective UAE jurisdiction, that provides standing to appeal before the respective courts. Commission Order 1 of 2020 The first petition to the Commission was filed on 4 October 2020 by the Federal Public Prosecution. The Commission issued its decision on 7 July 2021. Concept of absolute invalidity Brief: The Commission held that the absolute invalidity of a contract does not affect persons who relied on the contract, nor does it affect contract successors, should such persons (or successors) had relied on apparent circumstances that created an appearance of validity for the contract. Holding of the Commission on absolute invalidity: Applying the concept of absolute invalidity in contracts and extending the effects of invalidity to others leads to instability in transactions and conflicts with (i) the requirement to protect those who relied on what appeared to be truthful acts by the contract right holder and (ii) the good faith presumption that applies in considering the truthfulness of apparent circumstances. This is because the invalidation of a contract that is acted on within the apparent circumstances and cancellation of its effects from the time it was concluded will inevitably lead to turbulence and instability of transactions. Moreover, considerations of justice and the requirements for protecting the sanctity of transactions and upholding public trust in them requires protecting good-faith actors from the consequences of the contracts of their predecessors* when entering into such contracts after they – the good-faith actors – were assured of and believed in the validity of those contracts. Public interest requires that such protection be given for public welfare and the legitimate trust on which people depend. This protection finds its support in the fact that the absolute invalidity of a contract does not prevent considering its existence an actual reality. As the contract, despite its invalidity, creates apparent circumstances of validity on the basis of which a person acts in perceived good faith that it is a legally valid contract, as long as no error or negligence attributed to the person in this belief. *Predecessors is meant to mean the market, historically, or in a corporate sense, not the familial predecessors of the good faith actor. In other words, the market consists of a plethora of contracts. Many are predecessors or foundational to novel transactions or successor contracts. Should absolute invalidity be accepted by default, reliance on such predecessor contracts and bodies would fade and disrupt market stability. Doctrine of apparent circumstances Brief: Apparent circumstances that are deemed to have granted a contract validity must be given the same weight as the actual circumstances whose elements had invalidated the contract. Holding of the Commission on the doctrine of apparent circumstances: The actual circumstances that are deemed contractually illegal in respect of an invalid contract carry the same effect vis-à-vis persons who acted on such contract in good faith in the same manner as would have manifested if the required elements to perfect the validity of the contract had been achieved. This is based on the doctrine of apparent circumstances which justifies protection of persons in the event of wrongful disposal – that arise due to contracting with the agent of the apparent circumstances – that is contradictory to the actual circumstances, so long as good faith is evidenced on the part of the protected person. Notwithstanding that the doctrine of apparent circumstances is not stipulated explicitly nor implicitly in the Civil Transactions Law, the doctrine can still be relied on in pursuit of the protection of justice and interests. This is particularly the case as Article 1 of the Civil Transactions Law states that the rules of justice and interests are considered foundational to the law, after considering legislation, custom, and the principles of Islamic Law. Standard of good faith Brief: The act conducted between the agent of the apparent circumstances and any good faith actor is effective against the

UAE Supreme Court orders Government agency to pay company damages for license revocation

  Brief A company in Abu Dhabi providing electronic services since 2009 had its commercial license revoked by its licensing authority. The company challenged the revocation decision for being unfounded before the Federal Courts. The company requested from the Federal Courts: (1) cancellation of the license revocation decision, and (2) compensation of 100 million Dirhams. The Federal Primary and Appeals Courts ordered the cancellation of the license revocation decision – but rejected granting the company any damages. The Federal Supreme Court overturned the rulings of the lower courts and awarded the company compensation of AED 500,000 in damages for loss of profit. Liability to compensate In considering the liability of the government agency to compensate, the Supreme Court stated: “And since it is established in administrative law jurisprudence and case law, and the position of this court, that when a judgment is issued to cancel a decision issued by the administration on its non-contractual actions and the judgment acquired the force of res judicata, the element of error in the issuing of the administrative decision and its violation of the law is established and the liability for compensation for damages manifests.” Right to monetary damages In addressing the right to monetary damages, the Supreme Court ruled: “And since the damage as the second pillar of responsibility is the breach of the financial interest of the injured person, it includes the loss suffered by the injured and the loss of profit, provided that the damage is real, that it actually occurred, and it was found to be proven with certainty, or that it will inevitably occur in the future.” Legislative basis In quantifying the damages owed to the company, the Supreme Court relied on Article 282 of the Civil Transactions Law and accounted for a court-appointed expert report (obtained at the lower courts), and estimated damages as follows: “Article 282 of the Civil Transactions Law states that every act that results in harm to a third party obliges the perpetrator to repair the prejudice, and since the government agency had withdrawn the company’s license with a decision that the court canceled by a judgment that had the force of res judicata, and this [cancelled] administrative decision was what led to the damages sustained by the company, and therefrom, compensation for damage is dependent on the extent of the damage, and that in order to determine its elements, the court delegated an expert who … stated in his report that the decision revoking the company’s license prevented it from providing services to the public and lead to loss of the company’s clients that it held since 2009 … since the compensation is estimated for the damage incurred by the aggrieved party, and there is no provision in the law that obliges a specific criteria in estimating compensation, the court sets it at an amount of 500,000 Dirhams according to the elements of the aforementioned damage…” Author: Mahmoud Abuwasel

New rules on retrospective tax penalty waivers, installments, tax litigation, and class actions

  Brief For the first time since the UAE tax laws came into effect in October 2017, the legislation now: Grants permission to pay tax penalties in installments. Specifies reasons that permit penalty waivers.* Prohibits installments or waivers if litigation is ongoing. Allows for a class action against tax penalties. Permits waiver of penalties paid during the past five years. *Before, the legislation only stated that “accepted justifications” may substantiate penalty waivers, but it was unclear what would entail an accepted justification. Importantly, taxpayers must choose between either disputing tax penalties through the tax dispute resolution committees and the Federal Courts — or filing installment applications. The new changes make it unworkable for both to occur at the same time. And because of the time limitations, a dispute may be time-barred if the taxpayer opts to file an installment application instead of contending the penalties before the tax dispute resolution committees and the Federal Courts. Although there is no explicit similar restriction for waiver applications, it is assumed that litigation may prevent waiver applications as well. This is a substantive consideration for taxpayers as they must weigh the risks of sacrificing litigation against the risk of receiving a rejection on an installment application (and potentially waiver applications). Decree Cabinet Decree number 105 of 2021 was signed into effect on 28 December 2021 and published in the official gazette in first week of January 2022. The Decree is titled: ‘Regarding Protocols and Procedures for [Tax] Penalty Installments and Waiver’. The Decree comes into effect on 1 March 2022. Acceptability of tax penalty installments Approval of requests to pay tax penalties in installments is subject to the following conditions: The request must be in respect of unpaid tax penalties only. The minimum tax penalties subject to an installment request must be at least AED 50,000. The penalties subject of the installment request must not be currently in dispute before the tax dispute resolution committees or the Federal Courts, or any other relevant authorities. That the penalties do not have any associated outstanding taxes. Acceptability of tax penalty waivers  Approval of requests to waive tax penalties (in part or in full) is subject to the tax penalties not be associated with any crimes of tax evasion. The law is unclear on whether ‘crimes’ refers to mere allegations or actual convictions. Accepted reasons to grant penalty waivers are as follows: Death or illness of the taxpayer if the taxpayer is a natural person or owner of an establishment. Death, illness, or resignation of a principal employee of the tax registrant. Evidence of restrictions, or precautionary or preventive measures, applied on the taxpayer by UAE government agencies.* Evidence of system failure in the general, payment or communication systems of the Federal Tax Authority that affects a class of persons. Causes relating to restrictions on liberty and freedom of a natural person taxpayer or owner of an establishment. Payment of all taxes via the tax account of another registered taxpayer. In cases of insolvency or bankruptcy, penalties may be waived if they have been paid prior to the insolvency or bankruptcy, ad if it is evident that the insolvency or bankruptcy was not for purposes of tax evasion. *The law does not state “other” government agencies. It is unclear whether restrictions or precautionary or preventive measures, also apply to actions by the Federal Tax Authority itself. These reasons must – of course – be evidently directly linked to the implementation of the penalties. The committee maintains the right to waive penalties for any other reasons it deems acceptable. Class actions: The Decree permits the Director-General to propose to the committee waiver of penalties against a class of persons to whom are collectively affected by one of the accepted reasons noted above. As a note, the Decree refers to natural person owners of establishments. The Decree does not discuss single-person owned limited liability companies. Procedure for either tax penalty installment or waiver applications  The applicant of either an installment or waiver application must provide the general details (tax number, penalty amounts, reasons, etc.) in their applications. Importantly for installment requests, the taxpayer must file an undertaking that the penalties will be paid in accordance with the payment schedule that is accepted by the committee. Importantly for waiver requests, the taxpayer must file an undertaking that the cause of the penalties shall be rectified, and that the cause shall not occur again. A taxpayer may not file more than one application for the same penalty[ies]. Breach of the undertakings will nullify and void the underlying application. In other words, if the taxpayer breaches an undertaking against a waiver application by repeating the problem, the waived penalties may be re-implemented by the Federal Tax Authority. An application will be reviewed by the Federal Tax Authority within forty weekdays for compliance with all requirements, if the application is valid, it shall be referred to the committee. The committee has sixty weekdays to decide on an application (and ten days to notify the applicant thereafter). Lack of a decision is deemed a final rejection. Committee decisions  The committee will be responsible for setting the time limit for filing waiver applications. The committee will draw the payment procedures and schedules for installment applications. The committee is free to decide the percentage of penalties to be waived in respect of waiver applications. The committee may request any guarantee it sees fit to process an installment application. Presumably, the committee may request corporate, personal, or bank guarantees against an installment application. Failing to adhere to an installment payment plan may result in either: A new payment plan if there is a justifiable excuse for non-compliance with the schedule, or Action by the Federal Tax Authority against the taxpayer to collect the penalties. Retrospective penalty waivers The Decree requires waiver applications to be made in respect of unpaid penalties only – but the Decree also grants the committee authority to waive paid penalties that were paid five years prior to a waiver application. The

UAE Cassation Court rules amended memorandum of association not subject to the arbitration agreement in the original memorandum

  In a recent judgment by the Abu Dhabi Cassation Court, the Court looked into whether an amended memorandum of association binds the shareholders to the arbitration agreement in the original memorandum. Case The shareholders of a limited liability company included an arbitration agreement in the memorandum of association at the time of incorporation of the company. The memorandum was duly attested by the public notary and registered with the commercial registrar. The arbitration agreement between that parties stated that: “In the event that any dispute arises regarding the interpretation, implementation, or application of the agreement [the memorandum of association] provisions or for any other reason, it shall be resolved by amicable means agreed upon between the parties. If this is not agreed upon, the dispute shall be referred to an arbitration tribunal composed of three arbitrators.” Subsequently, one of the shareholders sold their shares in totality to the other shareholder, and the amended memorandum of association reflecting the new share ownership was duly attested by a public notary and registered with the commercial registrar. The amended memorandum expressly stated in its sixth clause that with the exception of the amendments stated therein, the rest of the terms of the original memorandum of association remain in effect. The amended memorandum did not include an arbitration agreement. The shareholders disputed and the case was brought before the Abu Dhabi Courts. The Courts applied their jurisdiction to adjudicate the dispute on the reasoning that the amended memorandum of association did not include its own respective arbitration agreement, and that the parties were not bound by the arbitration agreement in the original memorandum of association. Cassation Court reasoning The Cassation Court found that the referral to the original memorandum of association contained in the sixth clause of the amended memorandum did not imply the express consent of the parties to the arbitration agreement in the original memorandum and that it was not to be deemed clear and express reference to the arbitration agreement in the original memorandum. The Court’s position was that the reference to the original memorandum of association was just a general reference to its texts without specifying the arbitration agreement to evidence the parties’ knowledge of its presence in the original memorandum, and hence the general referral to the provisions of the original memorandum of association does not extend to the arbitration agreement therein. The Cassation Court reasoned as follows: “The provisions of Articles 4, 5 and 6 of Federal Law No. 6 of 2018 on Arbitration states that arbitration is an express agreement of the parties on the jurisdiction of the arbitrator excluding the courts to settle a dispute between them, and whether the agreement on arbitration is in the form of terms or conditions, it must be established in writing, whether the writing is in writing signed by the parties or what the parties exchanged in letters, telegrams or other written means of communication, and is considered an agreement on arbitration every reference in the substantive agreement to the document that includes the arbitration clause if the referral is clear and explicit in approving this clause. The effect of referral is achieved only if it specifies the arbitration agreement contained in the document to which it is referred. If the reference to the substantive agreement is just a general reference to the texts of this agreement without specifying the arbitration agreement evidencing that the parties know of its presence in the referred to substantive agreement, then the referral does not extend to the arbitration agreement and the arbitration is not to be considered agreed upon between the contracting parties, just as if there are annexes or schedules to the substantive agreement, it is not required that the parties sign and stipulate that these schedules and appendices are considered an integral part thereof, given that these annexes and schedules are nothing more than a detailed statement of the essential issues agreed upon by the parties, except that if those annexes include an exceptional condition such as the arbitration agreement, in which case the arbitration agreement does not apply to the parties unless they sign that annex.” (The translation of the judgment is for informational purposes only and is not a substitute for the official judgment. The original version of the judgment is the only definitive and official version.)  Takeaway In this judgment, the Abu Dhabi Cassation Court sheds light on the judicial approach with respect to Article 7(2)(b) of the Federal Arbitration Law which permits incorporating arbitration clauses by reference to any model contract, international agreement, or any other document containing an arbitration clause. And particularly does so in the sense of corporate constitutional documents. For shareholders with arbitration agreements in their memoranda of association, this judgment provides guidance on the position of the courts if any amendments are made to the original memorandum without an explicit arbitration agreement governing that amendment. Revisiting amendments to memoranda of association, or registered share transfer deeds, to ensure they reflect express consent to the arbitration agreement in the original memorandum would be a cautionary step to take to ensure the validity of the arbitration agreement. Author: Mahmoud Abuwasel

UAE Supreme Court acquits warehouse operator in tobacco tax evasion case

  Brief The Public Prosecution took action against two entities; a tobacco trader (first accused) and a warehouse operator (second accused) on tax evasion charges for possessing cigarette goods that lack the requisite distinctive marks (tax stamps). On 27 May 2020, the warehouse operated by the second accused was inspected by the Public Prosecution where eighty thousand cartons of cigarettes were found lacking distinctive marks. The cigarettes were owned by the first accused and sent for storage with the second accused on the basis of being subsequently exported to Pakistan. The first accused acknowledged knowing that the goods did not have the required tax stamps and that no evidence was provided from the selling party validating the entry of the goods into the UAE. The first accused’s defenses relied on whether the provisions of law relied on by the Prosecution were valid at the time of charge by the Public Prosecution. The second accused, however, argued mainly that the storage service was conducted pursuant to its permitted commercial activities, that it had no interest nor benefit in evading the tax, and that none of the criminal elements were evidenced against it. The Federal Supreme Court upheld the conviction by the Federal Appeals Court against the first accused. However, the Supreme Court quashed (set aside / voided) the judgment of the Appeals Court on the finding that the mere presence of the goods in the second accused’s warehouse is not sufficient to convict the second accused of participating in tax evasion with the first accused. Arguments – first accused The first accused confirmed that: They sent the tobacco goods to be stored in the warehouse of the second accused in preparation for shipment to Pakistan. They knew that the goods did not have the distinctive marks (tax stamps) as they were intended for export outside the country. They did not obtain documents from the party that sold the cigarettes proving their entry into the country through customs. The first accused argued – however – that the Federal Primary and Appeals Courts applied a repealed law, because the date of arrest was on 27 May 2020, and the provisions in force at that time were that of Law No. 2/2019 on Implementing the Marking Tobacco and Tobacco Products Scheme. Prior to Law No. 2/2019, the proceeding law was Law No. 3/2018 – also on Implementing the Marking Tobacco and Tobacco Products Scheme. Article 1 of Law No. 2/2019 set the starting date for certain prohibitions: Prohibition on importing designated excise goods without the tax stamps as of 1 March 2020. Prohibition on supplying, transferring, storing, or possessing designated excise goods without the tax stamps as of 1 June 2020. Article 1 of the canceled Law No. 3/2018 provided similar prohibitions against importing and supplying. The Federal Courts reasoned that these amendments between the repealed Law No. 3/2018 and the applicable Law No. 2/2019 were nothing but a renewal of this prohibition and do not justify storing excise goods without the requisite marks. Arguments – second accused The second accused did not dispute that the goods were seized in its warehouse, but insisted that; the criminal elements for conviction were missing; its actions were in good faith; the goods were being stored for the benefit of others as permitted by its commercial license; that it had stored the seized goods belonging to the first accused without knowing that they do not bear the distinguishing marks (tax stamps) that would prevent their possession or storage; that the first accused requested to store them to send them outside the country; and that the second accused had no interest in evading the tax imposed and due on the goods. The principal argument of the second accused (the storer) was that it was convicted despite the absence of the elements of the crime and the absence of criminal intentو and that it evidenced the presence of good faith and that it had no knowledge that the cartons stored do not bear the distinctive marks (tax stamps) and that it has no interest in not paying the tax and that it did not violate the company’s permitted commercial activity in its license and that the tax law did not provide for the criminalization of storage work for others, and the seized goods were in the possession of its owner – possession by means. The second accused focused on arguing that the Primary and Appeals Court judgments did not prove the second accused’s contribution to the non-payment of tax and that the first accused admitted that the goods belonged to it and that it deposited them in the second accused’s warehouse until they were to be exported outside the country and that the first accused bears the full tax due. The Federal Primary and Appeals Court relied on the testimony of the second accused during interrogation with the Public Prosecution which was quoted as follows: “The second accused testified that during interrogation by the Public Prosecution that a quantity of tobacco that was not allowed to be circulated inside the second accused’s warehouse was seized from and that it was owned by the first accused, and that the first accused sent it to their warehouse for the purpose of storing it and then shipping it outside the country, but they were unable to export it, so it remained in their (the second accused’s) possession. This indicates that the second accused participated with the first accused in evading the tax stipulated in the laws of the State and that he shall be jointly and severally liable before the State with the first accused towards paying the due tax and administrative fines.” On the basis of the interrogation testimony, the Federal Appeals Court upheld the conviction of the second accused as ordered by the Primary Court. Supreme Court trial The first accused was represented by the company owner in interrogation and in liability. The second accused was represented by a corporate representative in interrogation and in liability. The alleged evaded

Dubai Cassation Court accepts arbitration jurisdictional challenge even when not filed at Primary and Appeals Courts

  Novelty  It has generally been the case that a jurisdictional challenge against the courts to hear a dispute where an arbitration agreement exists must be made at the first hearing that takes place, at the first level of the overseeing trial court. (To clarify – the ‘first hearing’ is in reality usually the first case management session where a party is ordered to file their pleading. It does not necessarily refer to be a trial hearing before the supervising or trial judge.) Long-standing case law authority has been that where a party does not challenge the courts’ jurisdiction on the grounds that an arbitration agreement exists between the parties, it would be deemed as implicit consent to the courts’ jurisdiction. In a landmark judgment passed by the Dubai Cassation Court in October 2021, the Court found that: The court may of its own accord reject jurisdiction where an arbitration agreement exists. And (more significantly): That a party can file its jurisdictional challenge for the first time at the appellate or cassation courts – even if not presented at the primary or the appeals courts. Case The dispute revolved around a private corporate share acquisition where the share transfer agreement was subject to an arbitration agreement as the dispute resolution forum. The buyers filed their claim before the Dubai Primary Court seeking claw-back of the share sale with an order on the seller to re-acquire the shares. The seller did not defend before the Dubai Primary Court, nor before the Dubai Appeals Court, only filing their defense and rejection of the courts’ jurisdiction before the Cassation Court. Rulings The Dubai Primary Court rejected its jurisdiction to hear the dispute by its own accord, citing that the parties had agreed to resort to arbitration – even though the seller/defendant had not appeared nor filed any statements before the Court. The buyers appealed before the Dubai Appeals Court. The Dubai Appeals Court overturned the Dubai Primary Court judgment and ruled on the substance of the dispute. The seller/defendant had not appeared nor filed any statements before the Appeals Court either. The seller/defendant petitioned the Dubai Cassation Court to review and overturn the Dubai Appeals Court judgment. The Cassation Court ruled that: “…and it was proven in the evidence that the appellant [seller] did not appear before the Primary Court or before the Appeals Court, whose judgment is being contested, and he [the seller] did not submit any memorandum of his defense in the case, proving that he had not made any request or any defense or argument on the subject matter of the case in the two stages of litigation and that he had done so for the first time – arguing against the jurisdiction of the court due to the existence of the arbitration agreement – before this [Cassation] Court before making any request or any defense in the subject matter of the case…so the appellant’s argument that the Dubai Courts have no jurisdiction over the dispute in question due to the presence of the arbitration agreement is valid, and since the judgment of the Appeals Court has contradicted this consideration and decided on the merits of the case, it is thus defective, which requires its revocation.” The Cassation Court overturned the Appeals Court judgment and ordered that the Dubai Courts lack jurisdiction in view of the arbitration agreement. As noted, the position by the courts has generally been that a party must iterate and voice their challenge to the jurisdiction of the courts at the first hearing/case management session. This judgment and position taken by the Dubai Cassation Court expand the temporal and procedural spectrum of challenging the courts’ jurisdiction where an arbitration agreement exists between the litigants – granting litigants avenue to trigger jurisdictional arguments at latter court stages. Author: Mahmoud Abuwasel

Abu Dhabi Cassation Court acknowledges verbal, implied, or apparent authority to bind principal to an arbitration agreement

  Novelty In a landmark judgment by the Abu Dhabi Cassation Court in October 2021, the Court confirmed that an agent/representative may bind a principal to an arbitration agreement if they have: Explicit written authority. Explicit verbal authority. Implied authority. Apparent authority. It was recently the case that the Dubai Courts acknowledged apparent or implied authority to bind a party to an arbitration clause/agreement whilst the Abu Dhabi Courts generally required evidence of explicit written authority to do so. As a general matter, explicit authority as construed by the Abu Dhabi Courts had high thresholds such as maintaining an attested and valid power of attorney. This novel judgment by the Abu Dhabi Cassation Court establishes substantial precedent in expanding the validity of explicit authority to include verbal authorization. But more so, creates a new dynamic in acknowledging implied authority of an agent/representative to bind a party to an arbitration agreement. And furthermore, the position by the Abu Dhabi Cassation Court falls in line with global jurisprudence and practice in accepting the general principle of apparent authority (sometimes referred to as ‘ostensible authority’) which is a central principle of the doctrine of agency. Petition to invalidate the award Two subcontract agreements were entered into by the disputing parties containing an arbitration clause/agreement. The dispute was adjudicated, and an arbitration award was issued, under the rules of the Abu Dhabi Commercial Conciliation and Arbitration Centre. The net-loser of the arbitration procedures challenged the award before the Abu Dhabi Appeals Court on the basis that the signing representative was not an authorized signatory per the petitioner’s corporate bylaws and commercial registration records, nor did the representative have explicit authority to agree to an arbitration clause/agreement. The petitioner relied on Article 58/2 of the Federal Civil Procedures Law which states: “It is not valid, without a special authorization, to declare a right of the defendant, disclaim it, reconcile or arbitrate therein, approve the oath, or direct or challenge it, abandon the litigation, renouncing the judgment entirely or partially , relinquishing one of the channels of appeal therein, releasing the attachment (seizure), relinquishing the insurances with the continuation of the debt, claiming the falsification, recusing the judge or the expert or the real petition, or accepting it, or any other disposition that the law requires therein a special authorization.” Appeals Court finding The Abu Dhabi Appeals Court reasoned that the contracts, subject of the arbitration award, were signed by a representative who had previously been issued a duly notarized power of attorney, and that the contracts were signed within the year 2016 whilst the power of attorney was valid, notwithstanding lack of explicit authority in the power of attorney documents to bind the principal to an arbitration agreement. The Court continued to reason that the representative had indeed signed the contracts between the two parties in his capacity as a representative, and hence the petitioner (principal) is bound by all the clauses in those contracts, including the agreement on arbitration in the event of a dispute between the two parties. The court also factored in that it was proven during the arbitration proceedings that the petitioner paid some of the payments owed to the net-winner of the arbitration award and that the dealings regarding the contract transactions were conducted with the representative signatory of the contracts subject of the arbitration award. The Appeals Court concluded that these elements suffice to establish the validity of the arbitration agreement between the parties, and no basis is available to invalidate the arbitration agreement pursuant to the grounds available in Article 53 of the Federal Arbitration Law which governs possible objections to an arbitral award. Cassation Court decision The Abu Dhabi Cassation Court upheld the finding of the Appeals Court and further elaborated that: “…the authority of the agent may be explicit, implicit or apparent, and the authorization is explicit if it is verbal or written, and the authorization is implicit if it is inferred from the reality of the situation, and everything that was said or written, or the normal method of dealing may be considered…” The Cassation Court rejected the petition and upheld the validity of the arbitration agreement. Apparent or implied authority test In recent years the UAE courts have identified certain elements that test whether apparent or implied authority binds a principal to an arbitration agreement signed by an agent/representative lacking explicit authority. The courts consider any or all of the following elements if evidenced. The contract states the name of the signatory in the preamble. The contract states the name of the signatory in the signature page. The contract is stamped with the corporate seal/stamp. The contract is signed/initialed on every page. The contract is on the company’s letterhead. The contract was operated by the company. The contract was overseen by the signing agent/representative. The signing agent/representative communicated to the effect of enacting the transaction/contract. The courts do not necessarily require all these elements to be evidenced, but use their application to weigh and test whether implied or apparent authority manifests. Author: Mahmoud Abuwasel

Lebanon Pushes for Activation of Medical Cannabis Law

  On 20 April 2020, the Lebanese Parliament passed a law permitting the cultivation, trade, research, and use of medical cannabis. As a result of multiple factors, including the socioeconomic health of the nation, progress on the legalization of the cultivation of cannabis has been stagnant in Lebanon. The law establishes an authority named the Regulatory Authority for the Cultivation of Cannabis Plants for Medical and Industrial Use (the “Authority”) which would oversee all cannabis-related operations in Lebanon; however, the Authority has been inactive to date and has yet to approve any applications for the license types provided for in the law. On 28 October 2021, more than a year and a half after the enactment of the law, the Lebanese Ministry of Agriculture confirmed that the cultivation of cannabis will be implemented in Lebanon very soon. Lebanese Minister of Agriculture, Mr. Abbas Al-Hajj Hassan, stipulated that: “Today I would like to talk about Lebanon as a whole and the Baalbek-Hermel region and the Bekaa in particular, which is the subject of cannabis and is central and essential today for many reasons; we all know that the law exists and is approved, and therefore we await the executive decrees of the cabinet” Minister Hassan added that “Prime Minister Najib Mikati promised good things and has begun communicating with the ministries concerned, so that the law can be implemented.” Minister Hassan stated that the cultivation of cannabis in Lebanon will “save the Lebanese economy and the deprived areas of Kekar and Baalbek-Hermel“, stressing that “this will have internal and external positives, but the interior positive is the revitalization of the region”. Minister Hassan concluded his remarks by emphasizing that “the cultivation of cannabis will take us [Lebanon] far and will be presented at the international stage as an auxiliary solution on the subject of global health security, and we [Lebanon] will be strongly present in the international stage as a country that helps the international community in this context”. Over the past year, Lebanon has seen some drastic events that have deteriorated the health of the nation. With that being said, there is a strong belief within the nation that the legal cultivation of cannabis will be Lebanon’s saving grace. The area currently planted with plants producing hashish – the illegal form of cannabis – in the area of Baabalk-Hermel is estimated at 5,000 dunams (1,200 acres), located within the Bekaa Valley; the production of cannabis in the area, which is equivalent to $10,000 per plant, is the most expensive quality cannabis in the world. With the legalization and regulation of cultivated cannabis in Lebanon, the nation will seek to take advantage of the prosperous geological factors which make the production of cannabis in Lebanon the cheapest and highest quality cannabis currently available in the international markets. Author: Abdulla Abuwasel