Focus on… The application of law in business 

After a career and partnership in private practice, my time as general counsel of an Emirati Group has provided a different perspective on the practice of law and its application in business. Law is not an esoteric discipline but is the very language and methodology by which business is conducted. Law and judicial applications of it need to evolve to continually meet the demands of more complex commerce but also be rigorous and predictable. In the house, one also learns the wisdom of long-term thinking and relationships.  

The changes in foreign investment laws to permit 100% foreign ownership in many sectors may have had less effect than might be imagined on the Emirati partner. Astute foreign partners entering this market look for true joint ventures with experienced Emirati Groups with substantial local operating experience.  

Local partnering from one Emirate to another also remains a business imperative in some sectors, but this is changing. Relationships built on trust established decades ago become challenging to maintain as the generations who formed them pass. Furthermore, the model of risk-free partnering for turnover-based fees becomes increasingly difficult to justify with transfer pricing tax rules and galling in an environment of operating losses. Yet updating or exiting from these relationships is a delicate matter, and honour must be maintained. Relationships do still matter in doing business.  

More than anything, successful, well-run businesses require the ability to plan, assess probable outcomes and mitigate risk. The starting point is comprehensive contracts, usually with model clauses borrowed from the rich precedent system of the common law. However, applying UAE law to the contracts meant a civil code promulgated in 1985 to deal with the nature of commercial transactions in the UAE.  

The business faces a contentious environment where a party for whom it did not work out is prepared to toss the dice in litigation or arbitration. As the users of the legal system, companies are extremely puzzled and concerned by judicial decisions contrary to industry custom and practice as to the effect of these clauses; they are inexplicable and contrive to deliver what is deemed a ‘fair’ result. The result, when so far from what was ever expected by either party at the time of contracting, is not fair to businesses who need to know the basis of the risks they are taking when they conclude a contract in the UAE.  

It is unsurprising to see reports of a call to apply the common law to free zones. This is a reaction to the business’s need to operate in a predictable and mature legal environment where the allocation of risk is a known factor. An essential way for the UAE to up the ante as a favourable jurisdiction in which to do business in the region requires new, different laws for commerce based on known international commercial principles, judgments/awards that are subject to scrutiny and appeal for error of fact and law and a system of judicial precedent to promote business stability.