The Complete Lawyer

Expanding investment opportunities, increasing financial sophistication, economic reform and investor-friendly legislation have contributed to the Middle East’s growing status as an attractive region for investment and other business activity in recent years. The rapid growth of private industry, privatization, economic reform, removal of restrictions on foreign ownership of movable and immovable property, smooth and easy repatriation of funds, attractive tax schemes, and increased liberalization have elicited enthusiastic responses from the international business community which is increasingly investing and participating in the region’s economic system. A number of factors—including rising oil prices, increased international access to regional stock markets, and the fact that business people of the Middle East are seasoned traders and have long established traditions in doing business on a world-wide scale—are all contributing to rapid economic growth and opportunity in the region. This trend shows no signs of waning, and indications strongly suggest that the Middle East’s status as a hotbed for international business activity will extend well into the future.

Although international investors will find that their Middle Eastern counterparts are often willing and able to meet them more than halfway in bridging any cultural divides, it is nonetheless advantageous for international parties to gain some rudimentary cultural understanding of the area and its business environment.

Knowledge Of Each Country Is Paramount

The Middle East is an incredibly diverse region composed of many different ethnic, religious, and linguistic groups; cultural divergences are frequently vast even within individual countries. Therefore, potential investors and their agents need to familiarize themselves with at least a basic knowledge of the particular area within the Middle East in which they are doing business, and make sure that the lawyer or firm you engage has extensive experience in and knowledge of that particular country. If you are considering establishing an intra-regional business arrangement within a number of countries in the Middle East, seek legal counsel that has experience or presence in all countries involved.

This is important because many of the procedures and documents associated with the conduct of business in the region are carried out or available only in Arabic (while certain business laws are available in English translations, this is not sufficient to provide an in depth understanding of the requirements to doing business). Increasingly, locals draw contracts and agreements in English or in both Arabic and English. Second, the nature of the legal regimes in the region vary from country to country and reflect the influence of diverse legal traditions resulting in an intricate legal landscape that many foreign investors will find challenging to navigate without local assistance.

Many sophisticated businesses now accept having laws of foreign jurisdictions govern agreements, so ask for these clauses to be included in your agreement. Moreover, these businesses often agree to subject any dispute to internationally based arbitration centers like Washington, DC, London, Paris and Dubai. To avoid becoming embroiled in local court systems, include an arbitration clause in all agreements, state English as the language of arbitration, and ensure that the arbitral award is final and not subject to appeals in local courts.

Arbitral awards are easily enforceable because most Middle Eastern jurisdictions have acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958 (while many others have adopted arbitration laws that are modeled after the United Nation’s UNCITRAL Arbitration Rules of 1976). Contract enforcement and legal remedies are available throughout the Middle East for breach of contract or other obstacles, which can arise for international investors, but legal proceedings are frequently lengthy and intricate. It is advisable to have clear payment terms and events of default clearly agreed to and detailed in business agreements. Ask for letters of guarantee to be issued by internationally known financial institutions. In such circumstances, obtain the services of local counsel to ensure that any arrangements conform with local law and are enforceable.

Any parties wishing to conduct business in the Middle East should also become familiar with Islamic banking practices. Because Islam forbids the lending of money for interest, under Islamic banking rules, any funds employed by Islamic banks should be earned by way of profit from commercial risk where the bank and the customer share the risk. In addition, under Islamic rules, money should be invested in a profitable way to increase wealth. The idea that money has the ability to rise in value if used for a period of time is prohibited.

Corruption Is Reduced But Not Eliminated

Most Middle Eastern countries have undertaken great efforts to combat corruption over the past several decades, adopting stringent laws and rules on financial reporting, anti-money laundering and disclosure. Such efforts have generally met with success, and international investors will find that corruption issues present no serious obstacles to the conduct of business in the region in must countries.

That being said, the Middle East, like all areas of the world, is not completely corruption free. The predisposition to get a “good bargain” in the Middle East should not be confused with corrupt business practices. Investors should familiarize themselves with the laws in their home countries regarding corruption and work closely with local counsel to avoid possible complications arising from corrupt practices. As long as international parties adhere scrupulously to the law and operate with transparency and disclosure, corruption should present no serious impediment to business. Engage counsel to conduct legal and financial due diligence prior to concluding any transaction and to document it properly. Requiring disclosure and regular management and financial reporting is essential to avoiding ambiguities and corruption.