Out with the old, and in with the new

Michael Grose, Partner, Clyde & Co looks at the hottest topics that will be at the forefront of the legal profession in the region this year.

COMMENT, Business

Last year was a slow 12 months for developments in the field of law compared to the pace set by the region's construction industry. Will things hot up in 2008? To whet your appetite, here are some predictions for the hottest legal topics in 2008.

New Arbitration Law

At present, arbitration in the UAE is governed by clauses 203 to 218 of the Civil Procedure Law (Federal Law 11 of 1992). Rumours of a move to revamp the law to bring this more closely into line with modern commercial arbitration practice have been circulating for years. However, a new federal arbitration law emerged in draft form last year and is understood to be undergoing final revision and consultation prior to making it on to the statute books.

Few businesses will be looking forward to finding out whether the new arbitration law represents a significant improvement on the current position, but the introduction of a modern arbitration law would be consistent, in particular, with Dubai's long held ambition to host the region's leading international arbitration centre. The UAE's ratification of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards last year was a clear indication of intent. The introduction of a modern arbitration law in 2008 would be a significant step in the same direction.

Health Insurance

Introduced by the Emirate of Abu Dhabi last year, mandatory health insurance aims to ensure universal access to basic health care services for all employees.

It has the collateral benefit for the government of shifting part of the burden of funding the health care system from the public to the private sector. The Emirate of Dubai, which has been considering various models for similar compulsory health insurance schemes, looks likely to follow suit this year.

Health and safety laws

Health, safety and welfare has risen up the political agenda in recent years and February 2007 saw the publication of changes to the existing Labour Law (Federal Law 8 of 1980) for consultation.

The changes, if implemented, will pave the way for the introduction of detailed regulations governing minimum standards for employees' accommodation, medical care facilities and safety at work.

No date for the introduction of the draft Labour Law has been announced but with international interest in its progress running high, it is likely that there will be progress in 2008. As the real test of the changes will be in implementing the regulations, the preparation of these should be followed with interest by the construction industry.

The construction industry can also expect additional regulation though initiatives by a variety of government departments, developers and interest groups aimed at raising health and safety standards. Those wishing in 2008 for simpler, more effective regulation of health and safety and, specifically, a consolidation of existing laws into a federal health and safety law, are likely to be disappointed.

Value Added Tax

The latest reports from Dubai Customs, charged with devising a VAT implementation plan, suggest that 2008 could mark the start of the region's first serious move towards tax funded government.

The immediate impact is likely to be more psychological than material but the long life cycle of construction projects means that cost increases due to the introduction or change of taxes could start to be felt on projects awarded in 2008.

DIFC Arbitration Centre

The Dubai International Financial Centre (DIFC) already has its own legal regime, distinct from the laws applicable in the remainder of the Emirate of Dubai, including federal laws.

This regime includes the DIFC Arbitration Law (Law No. 8 of 2004). Significantly, arbitration awards made within the DIFC are, in principle, directly enforceable by the courts of Dubai without the usual ratification requirements, giving a DIFC based arbitration a significant competitive advantage over an equivalent domestic arbitration.

At present, it is unclear whether parties are free to select the DIFC as the place or seat of arbitration if there is no connection between the DIFC and the parties or the project. This uncertainty looks set to be resolved this year. If parties are given the freedom of choice, it is likely that the industry will start to see DIFC arbitration clauses appearing in construction contracts, ushering in a new age of dispute resolution in the Emirates.

Foreign direct investment laws

The Ministry of Economy recognises the need for a revamp of the UAE's laws on foreign direct investment. As illustrated by recent corporate transactions, this is matched by an appetite for direct investment by international businesses in the region's construction sector.

Other deals of a similar nature will follow in 2008. But the real breakthrough will be the long- awaited publication of a new federal companies law, which is expected to relax the current restrictions on foreign ownership of shares in UAE limited liability companies.

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