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Middle East Business Law Review

Spring 2008

MEBLR spring 08:Layout 1 14/4/08 16:15

Contents

Foreword 1

Mobile resellers in Oman – will they catch on? 2

Competition law and policy in the Middle East 4

Employee share schemes in the Dubai International Financial Centre 6

Nilex – The new Nile Stock Exchange for

Small and Medium sized Enterprises 8

Gulf states in the grip of rising inflation 10

Dubai Property Law Update 12

IPOs in Abu Dhabi 14

News from around the region 16

Snapshot Sara Hinton 17


ForewordWelcome to our first edition of MEBLR for2008. The new year has witnessed acontinuation of the crisis in theinternational capital markets and thisturbulence has had a mixed effect on theregion. The Abu Dhabi Securities Market,for example, continues to rise and the IPOmarket remains buoyant, also, as isdiscussed later in this edition, Egypt islaunching a new stock exchange forSMEs. Whilst these are all positive signs,many regional economies are feeling theeffects of rising inflation, exacerbated byfixed exchange rates pegged to theweakening US dollar.

In this edition Ross Barfoot offers anoverview of the IPO market in Abu Dhabi,Nick Gee provides an update on propertylaw in Dubai's booming real estate sector.Staying with the UAE, Russell Vickersexamines Dubai International FinancialCentre's recent initiative for an employeeshare scheme. Abdul-Haq Mohammedanalyses competition law and policy in theMENA region, while Saleem Adam reviewsthe recent liberalisation of thetelecommunications sector in Oman with theintroduction of mobile reseller licences. Wealso have an article on the launch of the newNile Stock Exchange (Nilex) by Hala SalahEldin and Louisa Butler examines the trendof rising inflation in the GCC.

If you have any queries on the issues raisedin the articles in this edition, please do nothesitate to contact me or any of the writers.

Spring 2008Middle East Business Law Review

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Martin AmisonPartner and Head of International,Londont +44 (0)20 7423 8000e [email protected]



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Mobile resellersin Oman – willthey catch on?Oman is the first GCC country tointroduce mobile reseller licences. It hasdone this through the introduction ofClass II licences, which are based on themodel of non-infrastructure basedcompetition.

The first stage of the telecommunicationsliberalisation within the Middle East is nearlycomplete. This has meant that new licenceopportunities are becoming increasinglyscarce and telecoms companies are findingit difficult to find places to put their money.Most telecoms regulators have a regulatoryobjective to make optimal use of the mobilefrequency spectrum. Oman has decided toachieve this by introducing service basedcompetition into a market where there is onefixed operator and two mobile operators.

It is worth explaining the concept of amobile reseller before continuing because, inOman, the term "reseller" is used to describewhat we commonly understand in thetelecoms sector as a Mobile Virtual NetworkOperator (MVNO).

The theory behind an MVNO is actuallyrather simple. An MVNO provides telephoneservices but does not own its owninfrastructure or frequency and hencecomes under the "non-infrastructure basedoperations" model. In fact, all an MVNO doesis purchase minutes, on a wholesale basis,from another operator who is licensed tobuild infrastructure. The MVNO then usesthese minutes to provide mobile telephone

services. In most worldwide regions,including Europe, MVNOs are not required tohave any strict regulatory authorisations orlicences to operate.

In Oman's case however, the regulator willissue Class II licences, costing OMR 2,500(approximately $6,500), provided it issatisfied with an applicant's credentials inseveral different areas. These includetechnical expertise to fulfil the licenceobligations, financial standing and previousexperience.

Other countries in the region haveconsidered MVNOs as a means ofliberalising the telecoms sector further. Weunderstand that Saudi Arabia consideredMVNOs in 2004, but opted for the moreprudent approach of introducing aninfrastructure based competitor, as opposedto an MVNO. The Bahraini telecoms regulatoris still considering introducing possibleservice based competition and theJordanian regulator introduced a frameworkto govern MVNO services last year.

Given the interest in MVNOs, there areessentially two models that an MVNO mayadopt on inception. The first is a jointinvestment and the second is a serviceprovision agreement, both likely to be with amobile operator. The most successfulexample of a joint investment venture is inthe UK: Virgin Mobile use T Mobile's networkas a licensed mobile operator.

Given the foreign investment restrictions inthe Middle East, it is likely that MVNOs in theregion will be a combination of the twoapproaches, ie a joint venture with a localpartner and a service provision agreementwith the licensed operator. The issuesrelating to a joint venture in this industry are


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In the case of a standard service provisionagreement, there are number of issues thatneed to be considered. Despite Oman'sadoption of a standard agreement model(that it expects all MVNOs to utilise in orderto govern their relationships with licensedoperators), it is worth bearing in mind thatthere are a number of issues that need to beconsidered for such agreements. Contractsshould not just focus on cost and volume,but on the services too, addressing any keyissues. In particular contracts should cover:methods for measuring service quality anddealing with service failures, guaranteeinginternational roaming and addressing newtechnology changes like 3G.

The main attraction for an MVNO is thatcustomers view them as completely newcompanies with most customers not beingaware that MVNOs rely on the infrastructureof existing network providers. Franklyspeaking, most customers want choice and,with it, lower prices. This pricing remit is everpresent in the obligations of most regulatorsin several forms. In Oman's case, theregulator is required to "ensure the provisionof telecoms services for all the Sultanatewithin reasonable limits and charges".

Despite these developments, given that mostcountries wait until there are at least twoestablished mobile infrastructure basedproviders before launching MVNOs,convincing investors and regulators that thetelecoms markets in the Middle East aremature enough to deal with service basedcompetition may take some time.

broadly the same as those that could arise inany such transaction in this region. However,particularly in Oman, focus should be on thetelecommunications regulatory provisionsand satisfying the regulatory body.

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Saleem AdamSolicitor, Omant +968 2468 2900e [email protected]



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Competition lawand policy in theMiddle EastDespite being of huge importance in theEU and US, competition/antitrust law andpolicy are at an early stage ofdevelopment within the Middle East.However, where these rules do exist theirprovisions must be followed.

Today, only eight out of the eighteen middleeastern countries analysed in this article(being the main MENA countries, as listedby the World Bank) have introducedcompetition laws: Algeria, Egypt, Jordan,Morocco, Qatar, Saudi Arabia, Tunisia andYemen. Provisions of which mainly follow theEC competition law models. Draftcompetition laws, however, have beenprepared and are currently undergoingconsultation processes in: Bahrain, Iran,Kuwait, Lebanon, Libya, Palestine, Syria andthe UAE.

Some of the region's countries, although nothaving introduced general competition laws,have equivalent provisions in theirtelecommunications laws (Bahrain andOman). In some cases, telecommunicationsregulatory authorities and competitionauthorities have dual jurisdiction toimplement competition rules (eg, Morocco,Jordan and Saudi Arabia).

Main rules and prohibitions of existingcompetition laws:

Restrictive agreementsAll of the current competition laws, in theMENA countries, establish a prohibition onrestrictive horizontal agreements (particularly

cartels), collusions or similar practices – themost evident, harmful and widely prosecutedinfringements of the competition rules aroundthe world. These prohibitions usually coverpractices such as: price-fixing, market-sharingagreements, output restrictions, hindrance ofmarket entry and collusive tendering.

Some of the laws (eg, in Algeria, Jordan andQatar) establish that the above restrictionsapply to all agreements, meaning bothhorizontal agreements (betweencompetitors) and vertical agreements(between customers and suppliers).

Some countries may, nonetheless, exemptrestrictive agreements from the competitionrules if: they lead to economic or technicalprogress, are beneficial to consumers or,generally cause minimal harm to competition.These grounds, however, are sometimes verywide and leave competition authorities or theGovernment with open hands to exempt anyrestrictive, but politically important agreement(eg, in Algeria and Qatar).

Abuse of a dominant positionAbuse of dominance, or monopoly power, isalso prohibited according to all existingcompetition laws in the region. Dominanceor monopoly power is usually understood asthe ability by one or more undertakings(single or joint dominance) to exercisecontrol over the market or fix prices withinthe market. Different criteria are used forestablishing dominance, eg market share ina relevant market.

Holding a dominant position is not itself aviolation of competition law in any of theMENA countries. However, abuse of thisposition will be regarded as an infringement.The common examples of abuse (lists areusually non-exhaustive) are: refusal to


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comply with injunctions, provision ofinaccurate information and many more. As arule, the sanction is a fine, but is sometimessupplemented by criminal sanctions forindividuals who participated in planning orimplementing the violation (eg, in Moroccothe sanction is imprisonment for up to twoyears). Fines to companies are usually verysubstantial and occasionally calculated as apercentage of the violating company'sturnover (eg, 2-5% in Morocco, and up to5% in Tunisia and Jordan).

The competition laws in some countriesestablish leniency programs and provide forthe possibility of immunity from a fine. This isusually subject to it being a confession or asa result of whistle blowing. Howevergenerally, decisions of the competitionauthorities are subject to court review (insome cases by the administrative courts) ongrounds of procedural and/or substantialfailures.

supply, hindrance to market entry,discrimination, predatory pricing and tying.

Merger controlMost of the region's competition lawsestablish requirements for parties to anintended merger, acquisition or otherconcentration, to notify the merger to thecompetition authority and receive itsclearance before implementing thetransaction, or at the latest a few days aftersigning the relevant agreements.

As a rule, there are two requirements whichrender a concentration 'notifiable': the jointmarket share of the companies concerned(eg, 30% or more in Tunisia and 40% ormore in Jordan) and the total sales (turnover)of the companies concerned (eg, greaterthan 20 million Dinars in Tunisia). However, insome jurisdictions, such as Saudi Arabia,thresholds are not established and allconcentrations must be notified.

The merger will usually be prohibited if itsubstantially lessens competition in therelevant market or, otherwise, creates orstrengthens a dominant position of themerging companies.

Competition institutions and legalsanctions for violationsIndependence of the competition authoritiesdiffers by jurisdiction. However as a rule, theGovernment or the Minister has a widediscretion to intervene. Generally, theauthorities have wide powers of investigation,such as inspecting business premises,seizing necessary documentation and others.

Sanctions may be imposed on companies ina variety of situations, such as: collusion orabuse of dominance, implementation of amerger without the prior approval, failure to

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Abdul-Haq MohammedPartner, Bahraint +973 17 515600e [email protected]



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Exempt Offer of securities must either:

� be made to and directed at professionalinvestors;

� be offered to no more than 50 offerees inthe DIFC during any 12 month period;

� not be part of a larger global shareprogramme where total considerationpayable for the securities exceeds US$1 million; or

� be offered to entities within the samecorporate group or to employees of theissuer. (Please note that this does notcover employees of a DIFC companywhere the issuer is not itself a registeredDIFC company).

The conditions are designed to exempt moststandard types of employee share schemesfrom any onerous obligations, but given thenature of schemes and the companies thatoffer them, it is not uncommon for conditionsnot to be met. Under these circumstancesthe provisions below in relation to permittedofferees, exempt offer statements and recordkeeping apply to Exempt Offers.

Employee shareschemes in theDubaiInternationalFinancial CentreAs large corporations and financialinstitutions look to attract talent into theDubai International Finance Centre (DIFC),they are beginning to offer shares as partof their compensation schemes. Under theDubai Financial Services Authority (DFSA)regulations these offers can qualify asoffers of securities and can inadvertentlylead to a company conducting a financialservice. While companies need not belicensed to offer such securities, they doneed to comply with DIFC rules so thatthey do not fall foul of the DFSA.

The DFSA permits two types of offers withinthe DIFC, Prospectus and Exempt Offers.Prospectus Offers require a prospectus,complying with DIFC rules or those ofanother sophisticated jurisdiction, to besubmitted to the DFSA and published.Exempt Offers are more germane toemployee share schemes.

Exempt OffersAlternative Qualifying Conditions determine ifan offer is an Exempt Offer of shares, or aPersonal Exempt Offer. These Conditionsalso dictate to what degree an offer isexempt from meeting DFSA regulatoryrequirements. Despite the name, it is rarethat an offer of securities can be madewithout regard to any regulations. In thecontext of an employee share scheme, an

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An offer is a Personal Exempt Offer if itsatisfies the second and third conditionsabove, if it is made to a person who is likelyto be interested in the offer (under themeaning given in the DFSA specifiedcriteria), and if the person to whom it ismade alone can accept it.

Other considerationsIt is expected that the rules will eventually bechanged to be brought in line withinternational practices. Until then the DFSAwill, at its discretion, grant a modification ofits rules to permit offers currently prohibited,to certain employee share or compensationschemes. This discretion has often beenused to allow offers to employees ofsubsidiaries, which do not currently fallunder the available exemptions.

Care needs to be taken to ensure that theinterests offered in an employeecompensation scheme do not constitute unitsin a Collective Investment Fund. Separaterules apply to these funds that could prohibittheir offering within the DIFC, entirely.

ConclusionEmployee share schemes are commonlyoffered in the DIFC and provided theseschemes are structured appropriately, canbe undertaken without creating an onerousadministrative burden. Furthermore, theDFSA has regularly permitted modificationsto the rules to allow schemes from outsidethe UAE, operated at group level, to filter intothe DIFC.

Russell VickersSolicitor, Dubait +971 (0)4 3519201e [email protected]

Qualified InvestorsAn Exempt Offer can only be made to"Qualified Investors", defined as individualswho:

� can provide written confirmation to theofferor that they have at least US$1 millionin liquid assets;

� are adjudged to have sufficient financialexperience and understanding toparticipate in financial markets in awholesale jurisdiction; and

� have consented in writing to being treatedas a Qualified Investor in a wholesalejurisdiction.

Exempt Offer StatementA formal statement must be provided with theoffer, to each offeree, prior to the formationof any binding contract. This statement mustinclude details of the issuer and/or offeror,the nature of and rights attached to thesecurities offered and contain a DFSAspecified disclaimer and/or sales legend.

Record-keeping requirementsFinally, an entity making an Exempt Offermust keep certain records, throughout theperiod of the Offer. These records must bemaintained for a period of six years from theend of the period of the Exempt Offer andbe capable of prompt reproduction to theDFSA, in English, during business hours.However, unless specifically requested, bythe DFSA, it is not necessary to file suchrecords.

Personal Exempt OffersIf an offer qualifies as a Personal ExemptOffer, there is a drastic reduction inadministrative requirements as there are noapplicable filing, offeree status, disclosure orrecord-keeping requirements.



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Nilex – The new Nile StockExchange for Small andMedium sizedEnterprisesAccording to the Organisation forEconomic Cooperation & Development(OECD), small and medium sizedenterprises (SMEs) contribute 80% of thetotal GDP and 75% of all jobs in Egypt.Yet SMEs receive only 6% of bankfinancing. This shortfall in fundinghinders their potential growth and anypotential benefits to the economy.

The new Nile Stock Exchange (Nilex) forSMEs was the latest addition to the marketduring 2007, by virtue of Decree No. 62 of2007 issued by the Chairman of the Boardof Directors of the Capital Markets Authorityon 11 July 2007. It gives a fresh platform toSMEs to raise capital within a regulatedenvironment, designed specifically to meettheir needs.

Nilex offers flexible listing rules with respectto the minimum capital, number ofshareholders and number of shares to beoffered to the public. Furthermore, it easesthe listing and disclosure requirements andoffers lower listing and trading fees. Unlikethe Cairo and Alexandria Stock exchange(CASE) which requires companies that wishto list on it to have a minimum paid-in capitalof LE20 million and to have at least 2 millionshares issued, Nilex only requires a paid-in

capital of LE 500,000 and 100,000 issuedshares. The minimum free float should be atleast 10% of the total issued shares and thenumber of shareholders should not be lessthan 25. The issued capital should be fullypaid in at a value ranging from LE1 to LE5per share. Shareholders' equity should be noless than 50% of the company's paid upcapital in the year preceding the listingapplication.

With respect to disclosure rules, Nilex offerslighter yet cohesive disclosure rules. SMEsare required to submit their audited annualfinancials to Nilex and the Capital MarketAuthority, while quarterly and semi-annualfinancials are to be approved by thecompany's management only, beforesubmission. However, given that companiesmay not possess all documents supportingtheir financial history, which may render thepreparation of such financials, along withany supporting documentation, quitedifficult, it was made mandatory forcompanies wishing to list on Nilex to retain anominated advisor by virtue of a contract ofappointment with the company.

The advisor is expected to assist theapplicant company on all its responsibilitiesduring the Nilex application process and inmaintaining its status once listed. Advisorswill also assist the company with ongoingdisclosure obligations as well as on anyinitial public offering of its shares. Theadvisor is under an obligation to inform theCapital Market Authority in case of thecompany's non compliance with the rulesand regulations and must be retained toperform their obligations and responsibilitiesfor at least two years from the date of listing.

An applicant company will however beexempted from the requirement to maintain a


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expensive CASE, attempting to diversify theirportfolios by investing in what should behigh growth companies.

Trading has not yet commenced on Nilexand the companies to be listed are still in theprocess of completing their applications.CASE has expressed concern at howselective Nilex's approach is in respect ofallowing companies to list. Nilex is onlyaccepting applications from thosecompanies that appear to have a goodpotential for growth, thus providing the bestbenefit to the economy as a whole byattracting more domestic and foreigninvestments and creating more jobs.

nominated advisor if one of its shareholdersis a venture capital or financial institution,owning not less than 10% of the total issuedshares. Such shareholder will have toprovide a written statement to the effect thatit will refrain from disposing of its shares fora period of two years from the date oflisting.

It is intended that when the stocks ultimatelytrade on the Nilex, the share price shouldremain low, reflecting the size and value ofthe underlying assets. Trading will beeffected via an auction system, unlike thebuy/sell method used on the CASE. Thismechanism is intended to help indetermining a fair value of the company,however it is still to be seen how this will beenforced.

Among the other benefits of Nilex, is theopportunity it offers to small investors, whocannot afford to invest on the more

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Hala Salah EldinLegal consultant, Egyptt +20 (0)2 27357332e [email protected]



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Gulf states in thegrip of risinginflationThe economy in the Gulf is booming.While sustained high oil prices,phenomenal public and privateinvestment in infrastructure projects andhigh levels of regional liquidity are drivinggrowth in the six Gulf CooperationCouncil (GCC) states, the recent oil-priceboom has helped to fuel anunprecedented rise in the rate of inflationacross the GCC. Prices are rising at theirfastest pace this decade, propelled byeconomic growth and governmentspending of mammoth oil revenues. Suchinflation has been further exacerbated bythe Gulf currencies fixed exchange ratepeg to the weak US dollar.

The inflation rate in Saudi Arabia (whereinflation has been virtually zero for adecade) is believed to have reached 7%, a25 year high. Likewise, it is predicted thatOman's inflation rate will rise above 8% thisyear. In Bahrain and the United ArabEmirates (UAE), rates are already in doublefigures and in Qatar the inflation rate wasnearing 14% in the last quarter of 2007.

Spiralling Inflation has promptedastronomical rent increases throughout theGCC, with rent increases in Oman furthermagnified by the acute shortage ofaccommodation following Cyclone Gonu inJune 2007. The governments of the UAE andOman have imposed rent caps of 5% and15%, respectively on rent rises over the nexttwo years, but with the supply of housingfailing to keep up with demand, housingcosts are likely to continue to rise, furtherdriving up inflation. Nonetheless, it is hopedthat the current construction boom will helprelieve pressure on rents, throughout theGCC, as more homes come on to the market.

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Faced with a combination of the fallingpurchasing power of Gulf currencies and theappreciation of the currencies in their homecountries, working in the region is becomingless attractive. Construction workers in theUAE and Qatar recently went on strike toprotest over the dwindling value of theirwages. Anecdotal evidence suggests inflationeven impacted upon last year's Eid festivities,with the price of sacrificial animals becomingprohibitive for many poorer families.

In an attempt to reduce the effects of risinginflation, the UAE has increased salaries forpublic sector employees by 70% with Omanraising theirs by 43%. Saudi Arabia hasraised wages, increased subsidies on foodand everything from shipping costs todriving licence fees. Other policies havebeen introduced throughout the GCC tocushion the effects of inflation. However,there is a danger that these non-marketmeasures, while aimed at mitigating theimpact of inflation on domestic consumers,may actually fuel the problem and distort thereal estate markets. Inflation is created whentoo much money chases too few goods, sosubsidies, allowances and wage increaseswill only serve to exacerbate that problem.

Inflation in the Gulf has many causes. Rapidpopulation growth in all Gulf states hasstretched local supplies of consumer goodsand housing. Additionally, a heavy relianceon food imports has made the regionespecially vulnerable to the recent globalrise in commodity prices. Yet the majorcause of inflation is the mounting price of oilitself. Governments, flush with oil money,have been furiously spending on large scaleenergy and infrastructure projects to keepup with growing populations and to sharethe fruits of the oil boom. All this spendinghas, however, had the unfortunate side effect

of worsening inflation. The Omanigovernment has attempted to slow down itsspending and prevent overheating of theconstruction sector by announcing that theTender Board, the body that awards contracts,will meet fortnightly instead of weekly.

The inability of GCC states to control risinginflation is largely due to the Gulf currency'sfixed exchange rate peg to the weak USdollar. This pegging restricts the ability of theGCC states to fight inflation by compellingthem to mirror US monetary policy at a timewhen the US Federal Reserve is slashinginterest rates to avoid recession, yet Gulfeconomies are booming.

Debate is rife in the Gulf on how to tackleinflation. It has been suggested that inflationrates would fall significantly if the GCCstates dropped their US dollar peg. In May2007, Kuwait dropped the peg, linking theDinar instead to a basket of currencies,including the euro, yen and British pound.Since dropping the peg, Kuwait hascontinued to suffer from inflation but at adecreased pace. Qatar is consideringwhether to revalue its currency, while Omanhas ruled out dropping the peg this yearbecause it is felt a weaker Rial helps attractforeign investment and encourage exports.Saudi Arabia and UAE central bank chiefsare in favour of retaining dollar pegsbecause they do not believe that floatingtheir currencies would be sensible, whenboth countries are unable to boast a diversearray of exports, instead relying on theexport of a single commodity, oil.

Louisa ButlerSolicitor, International, Londont +44 (0)20 7423 8010e [email protected]



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Dubai PropertyLaw UpdateThe past year has witnessed theintroduction of a number of significantlaws in Dubai, passed with the aim ofregulating property ownership andproperty related transactions and atincreasing transparency and consumerconfidence.

In June last year the Escrow Account Lawwas introduced to provide a framework toprotect payments made in off-plan projects.The law was developed due to concerns thatmonies, paid by buyers or advanced bylenders to sub developers, in these projectswere vulnerable to potential misuse.

Under the Law, all developers are requiredto be registered at the Land Department andare required to open an Escrow Account inrespect of each off-plan developmentundertaken. Payments to off-plandevelopments must be credited to theaccount which must be managed by afinancial or banking institution approved bythe Land Department. Funds in the EscrowAccount are specifically earmarked forpayment to contractors and consultants andmonies can only be released whenconstruction milestones have been reached,and certified by the bank's engineer, subjectto the requirement that 5% of the funds areretained for one year post completion of theproject.

Another important step forward has been theintroduction of the long awaited Strata TitleLaw (Strata Law). In essence, Strata titlegives the right to own a unit in a multi ownedbuilding or community, together with an

undivided share in the common propertyrelating to the multi owned building orcommunity. The law requires that thecommon property be registered at the LandDepartment under its own title and that anowner's association, made up of the unitowners, is established to administer andmanage the common areas for the benefit ofthe owners and occupiers. Each unit ownerbeing required to pay a proportional share ofthe service charge.

The Strata Law imposes an obligation on thedeveloper to rectify structural defects to

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notice to the tenant and obtain the consentof the Rent Committee. During thecontractual term the landlord can recoverpossession if the tenant is a bad tenant ordefaults on the rent.

One of the most important developmentsover the last year, which has given theproperty market further credibility andconfidence, is the establishment of RERA inJune 2007. The agency has been entrustedwith policing the real estate market, haspowers to regulate property transactionsand is responsible for licensing all thoseinvolved in real estate activities.

RERA has already shown its teeth andamongst its recent initiatives has: abolishedtransfer fees in the secondary market; setup a system for pre-registration of contractsin off-plan developments; and stated anintention to introduce standard form propertydocumentation as well as minimumprofessional standards for real estatebrokers, including a requirement forcontinuing education.

Although property law in Dubai is still youngand taking shape, it has come a long way ina very short period of time. The appetite foroverseas investment will drive forward theneed for more regulation so as to givepurchasers, mortgagees and tenants theconfidence that their investment has the fullprotection of the law and that individualscan, freely pass on property to futuregenerations.

common property occurring within ten yearsfollowing completion of the project and alesser obligation to rectify installationsbecoming defective within the first year frombeing handed-over. Further, the law requiresthe owner's association to obtain insuranceagainst damage to the common propertyand to insure against the risk of physicalinjury to the occupiers of the commonproperty.

The Strata Law addresses many of theuncertainties regarding common ownershipfaced by unit owners in the past and is seenas another positive step in the evolution of amore consumer friendly property regime.

Other laws also introduced to provideconsumer confidence are: the rent cap (anew law which regulates relationshipsbetween landlords and lessees) and theestablishment of the Real Estate RegulatoryAgency (RERA).

The rent cap was introduced in 2006 toaddress soaring increases in rent prices,across Dubai, in respect of lease renewalsin 2008 the cap has been fixed at 5%.

Under the new landlord and lessee (LAL)law all tenancy agreements will soon have tobe in writing and registered with the newReal Property Organisation Establishment.

The LAL law provides for automatic renewalof leases at the end of the contractual term,unless the landlord can establish one of thespecified grounds for possession. Suchgrounds essentially being that the landlordintends to demolish and reconstruct theproperty or that the landlord wishes to usethe property for his own use or that of aclose relative. Before the landlord canrecover possession he is required to give

Nick Gee Consultant, Dubait +971 (0)4 3519201e [email protected]



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IPOs in Abu DhabiWhat is an IPO?An Initial Public Offering, or IPO, occurswhen a company offers all or part of itsshare capital to the public for the firsttime. Such offerings are typicallycombined with a listing of the sharecapital on a recognised securitiesexchange, such as the Abu DhabiSecurities Market (ADSM).

Companies use IPOs as a means of raisingcapital and in return for the capitalinvestments shares are issued to theinvestors. These shares can subsequently betraded or retained with a view to sharing infuture profits of the company.

Preparation for an IPOStrict criteria must be met before a companycan trade their shares on the ADSM. Theprocedure for obtaining a listing is lengthy,and it is not uncommon for listings to takeupwards of six months from when primaryapproval for listing has been given. Furtherdelays to the listing process may occur if thecompany requires, for example, a derogationfrom the rules relating to the ADSM.

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Adequate preparation and planning for anIPO is essential and requires theappointment of a specialised IPO advisoryteam to lead the company from unlisted tolisted status. Typically, an IPO advisory teamwill consist of a sponsor (bank),accountants, lawyers, PR consultants andprinters who should all have IPO expertise.The entire IPO team should seek to work intandem with each other, whilst alsomaintaining a close relationship with; theADSM, the Emirates Securities andCommodities Authority, the Ministry ofEconomy and the Abu Dhabi Central Bank.These external relationships are necessaryto ensure the IPO receives full support andproceeds with minimum interruption to theapplicant company's business or the IPOtimetable.

It is also important for companies to ensurethey are fully aware of the impacts ofincreased accountability to shareholders andadditional corporate governancerequirements may have upon their business,or businesses, post-IPO. Additionally, thecompany should be aware that significantmanagement time will be consumed whilstthe company undertakes preparation for theIPO.


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restrictions on the proportion of shares thatcan be owned by non-nationals with only 9%of the shares in companies listed on theADSM being held by non-nationals. Atpresent the market simply does not, by itsnature, enjoy the same liquidity as moreestablished Asian and Western bourse.

Further, there is no guarantee of the successof an IPO. An IPO could beundersubscribed requiring companies to relyon expensive underwriting agreements, or atworst, the share capital in the company notbeing listed at all.

ConclusionWhilst the success of IPOs will always beinfluenced by market forces the followingfactors point towards continued buoyancy inAbu Dhabi's capital market:

� the increased market regulation andtransparency of the ADSM;

� local investors looking for moresophisticated ways of maximising returnson their investments; and

� an increasing move towards privatisationby the Government of publicly ownedassets.

The resultant investor interest and demand,coupled with an ever maturing andincreasingly liquid market, should secure thefuture success of carefully targeted andplanned IPOs in the country.

Ross BarfootSolicitor, Abu Dhabit +971 (0)2 6267274e [email protected]

A cost-effective way to raise capitalAn IPO offers a means by which a companymay raise capital more cost effectively thanby way of debt financing. Following an IPO,the company is not compelled to makecapital or interest repayments, as it would toa creditor, and therefore will potentially havegreater funds to invest in future profit growth.

Companies may also benefit from an IPO'srequirement to undertake a corporatereorganisation prior to listing. Thesecorporate reorganisations usually result inthe adoption of a more sophisticated riskand business management structure.

At present, IPOs receive unprecedentedsupport from private investors in the MiddleEast, with most IPOs generally being over-subscribed. In 2007 a record US$10.5 billionwas raised from IPOs and according to theAbu Dhabi based investment bank, GulfCapital, Gulf companies are expected toraise a further US$10 billion, through 83IPOs, over the next three years.

ConcernsThe IPO market in Abu Dhabi remainsstrong, despite a correction to the market in2006 wiping off 35% of the value of ADSM.However, 2007 saw an increase in value of25%. Many see the correction as heralding amaturing of the ADSM after theunsustainable private investor frenzies in2005 and 2006, which over-valued newlylisted companies and the market as a whole.Private investors are becoming increasinglydiscerning with the companies they chooseto invest in as the novelty of public shareownership begins to wear off.

The rise of private investors has increasedthe liquidity of ADSM but is not without limit.The majority of listed companies have


News fromaround theregionNew Chemicals Industrial City planned forAbu DhabiThe Government of Abu Dhabi, through theInternational Petroleum Investment Companyand Abu Dhabi Investment Council, hasannounced that it is preparing for the firstphase of the development of a planned newChemicals Industrial City to be located inAbu Dhabi, the United Arab Emirates.

The multi-billion-dollar project comprises aworld-scale naphtha cracker, a world-scalereformer, xylene, benzene, cumene, phenoland derivatives units. Upon completion ofthe first phase, expected in 2013, thecomplex will be the largest and mostintegrated of its kind in the world,supporting the Abu Dhabi government'sstrategy of diversifying its economy. Theoutput from the planned complex is plannedto offer a wealth of new opportunities forfurther development of the downstreamindustries in the country.

Abu Dhabi hopes the complex will becomean industry model for chemical integrationwhile helping support the goals of the AbuDhabi government to diversify its economy.These plans also offer opportunities forinternational chemicals and plasticsinvestors.

Recent movesPeter Maxfield has relocated to the Dubaioffice from Oman.

Julien Sweeting has relocated to the Saudioffice from London.

Forthcoming seminars

� Trowers & Hamlins partner Nigel Truscottwill be speaking at the DIFC – DubaiCourts Workshop, 27 April in Dubai. Nigelwill be participating in a panel discussionon the jurisdiction of the DIFC Court. Ifyou would like further details on this event,please contact Emily Adlington [email protected]

� Trowers & Hamlins is holding its annualMiddle East business briefing onThursday, 15 May at our offices in London.The event provides an excellentopportunity for clients and contacts of thefirm to question experienced operators inthe Middle East and to review currentmarket trends and conditions. Theseminar, for which there is no charge, willstart at 2.20 pm. If you would like furtherdetails of this event, or to register pleaseemail Clare Usher at [email protected]

Top firm rankingsWe are pleased to announce that Trowers &Hamlins has been ranked among the bestplaces to work in the UK in the SundayTimes '100 Best Companies to Work for2008' and awarded 28th place in theinaugural Managing Partners' Forum '100 Best Professional Firms to Work For'.


16


Snapshot Sara Hinton

6

Sara Hinton moved from London to Cairoin 1994. She is married to an Egyptiannational and has dual British/Egyptiannationality. Sara joined Trowers &Hamlins' Oman office in 1998 beforemoving back to Egypt to help open thefirm's Egypt office in 1999 for which shetook up the position of ResidentManaging Partner in 2001. Sara has over13 years' experience of the Egyptian legaland business environment and is wellknown to and respected by the localbusiness and legal communities.

Sara primarily works in the corporate,projects, telecommunications, bankingand capital markets sectors. Her clientbase is primarily multinationalsheadquartered in the Gulf, Europe orAmerica, although she also represents anumber of prominent Egyptians and isexperienced in advising on dealings withthe Egyptian government.

Sara was a founding member of theBritish Egyptian Business Associationand is currently the Vice-Chairman.

What significant deals have you beeninvolved in?I have advised on a number of high-profiledeals including: advising Sanpaolo (nowIntesa Sanpaolo) on its successful bid for an80% interest in Bank of Alexandria, the firstbank privatisation in Egypt; advising EximBank and the commercial lenders on theEBIC ammonia plant, being the first exportcredit facility provided by Exim Bank inrespect of an Egyptian project; andVodafone in respect of a joint venture withTelecom Egypt concerning their respectiveshareholdings in Vodafone Egypt.

I am currently advising on the acquisition ofan interest in a leading local advertising andmarketing group, in addition to advising oneof the bidders for a 67% interest in Banquedu Caire, the second bank privatisation inEgypt. I am also advising on theestablishment of a number of funds bothonshore, pursuant to the recently revisedlocal rules on fund establishment, andoffshore.

What do you enjoy doing in your sparetime?In my spare time I look after my three smallchildren and, children permitting, I like toplay the piano, read and go to the gym. I amalso a keen gardener, being particularlyproud of the fact that I have managed to getwisteria to flower in my back-garden, andenjoy travelling and scuba-diving.

Spring 2008

www.trowers.com 17

Sara HintonResident Managing Partner, Egyptt +20 (0)2 27357332 e [email protected]


Contact:

LondonMartin Amison

Sceptre Court

40 Tower Hill

London

EC3N 4DX

UK

t +44 (0)20 7423 8000

f +44 (0)20 7423 8001

e [email protected]

Abu DhabiAndrew Rae

Butti Al Otaiba Building

Khalifa Street

PO Box 45628

Abu Dhabi

United Arab Emirates

t +971 (0)2 6267274

f +971 (0)2 6267276

e [email protected]

DubaiNick White

BurJuman Business Tower

Sheikh Khalifa

bin Zayed Road

(Trade Centre Road)

PO Box 23092, Dubai

United Arab Emirates

t +971 (0)4 3519201

f +971 (0)4 3519205

e [email protected]

OmanMajid Al Toky

Al Jawhara Building

Al Muntazah Street

Shatti Al Qurum

PO Box 2991, Ruwi 112

Sultanate of Oman

t +968 2468 2900

f +968 2469 7609

e [email protected]

RiyadhFeras Al Shawaf, Law Firm,

in cooperation with

Trowers & Hamlins

PO Box 63956

Riyadh 11526 – Olaya

Prince Sultan Street

Kingdom of Saudi Arabia

t +966 01-4614001

f +966 01-4660618

e [email protected]

BahrainDominic O'Neil

9th Floor, The Tower

Sheraton Commercial

Complex

PO Box 3012

Manama

Bahrain

t +973 17 515600

f +973 17 535616

e [email protected]

For further information, please contact us at any of our officesor visit our website at www.trowers.com

L O N D O N M A N C H E S T E R E X E T E R A B U D H A B I B A H R A I N C A I R O D U B A I O M A N R I Y A D H

If you would like to be removed from the mailing list for this publication, or our contacts database (and therefore not receive any of ourmailings) please contact [email protected].

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© Trowers & Hamlins 2008

Produced by Trowers & Hamlins, Sceptre Court, 40 Tower Hill, London EC3N 4DX.

Front cover image: iStockphoto

Trowers & Hamlins has taken all reasonable precautions to ensure that information contained in this document is accurate, but stressesthat the content is not intended to be legally comprehensive. Trowers & Hamlins recommends that no action be taken on matters coveredin this document without taking full legal advice. Trowers & Hamlins holds the copyright for Trowers & Hamlins Middle East BusinessLaw Review which is sent to you on the basis that it should not be used or reproduced in any material or other medium produced byyou or passed to any third parties without the prior consent of Trowers & Hamlins.

CairoSara Hinton

1 El Gabalaya Street

3rd Floor

Zamalek

Cairo

Arab Republic of Egypt

t +20 (0)2 27357332

f +20 (0)2 27357314

e [email protected]


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