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Khalil Khazindar Law Firm
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JASON HUF INTERNATIONAL pc
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  • A "21st Century" Saudi Arabia

    21st Century Saudi Arabia

    Near the close of 2016, while the West was focused on the High Holidays, a new American President and the NFL Post-Season that would culminate in a historic Super Bowl LI, the government of Saudi Arabia (KSA) leapt into the 21st Century - literally.

    Under the direction of Deputy Crown Prince Mohammed bin Salman, with the full support of his father King Salman, the Saudi Government officially abandoned the Hijri Calendar (the Islamic, lunar calendar which begins with the Prophet Mohammed's trek from Mecca to Medina and the establishment of the first-ever Islamic state), and has adpoted the "Gregorian" calendar (named after Pope Gregory XIII, the solar calendar predominantly used as the civil calendar in the West and elsewhere, which begins one week following the Roman church's, and the day of the Eastern Orthodox churches', traditionally espoused birth of Jesus Christ; the civil calendar used in the West arbitrarily measures months as being either 28/29, 30 or 31 days in length).

    Initially functioning as a budget cutting measure, with government employees receiving the same monthly salaries while working an additional eleven (11) days of the year, its the eternal questions of "what next?" that holds the world's attention as those with commercial ties to the KSA wait the other shoe(s) to drop.  What are the other consequences, both intended and unintended, of the Saudi government's adherence to this new calendar?  How, if at all, will this impact governance and/ or commerce in the Kingdom?

    Saudi Arabia is, and was founded to be, an Islamic state.  Its Constitution is the Quran.  The change from a calendar that is dear to their faith and which honors the pilgrimage of their holiest and most revered prophet, to a calendar created by a Roman military dictator and revised by a Catholic Pontiff is, in and of itself, revolutionary.

    For now, its impact is seen strictly as a government austerity measure. Nonetheless, and predictably, the more conservative elements of Saudi society, including the clerics with whom the King shares and exercises power, are resisting this particular change.  They presently appear to center their resistance around their concern that the masses will not adhere as faithfully as they have in the past to the holy month of Ramadan (which, like all months in the Hijri calendar, is measured by the lunar cycle).
     
    JHI is confident that good muslims will adhere to Ramadan, just as good christians adhere to Easter, the date of which is determined by the advent of the Jewish observance of the Passover holiday (the Jewish calendar measures months by lunar cycles, occasionally adding a month to make up the discrepancy in days between 12 lunar months and one solar year; thus, while Passover - and the subsequent Christian Easter - are celebrated on the same days of year, every year, on the Jewish calendar, they are celebrated at different times of the year on the civil, or "Gregorian", calendar).

    Neverless, acquiescence to the Saudi government's new calendar will not occur overnight.  As conservative elements tend to dominate the judiciary, and are well-ensconced in the various levels of the bureaucracy in the KSA, JHI feels that for the time being it remains prudent to continue to use language referencing the "Gregorian" calendar as controlling in the boilerplate of contracts and other documents pertaining to business in the Kindgdom of Saudi Arabia - including and especially those documents related to participation in government projects, whether as a contractor or sub-contractor.

    JHI will continue to follow the evolution of this particular change, and other developments related to the Vision 2030 reforms, as the Deputy Crown Prince pulls his country into the 21st Century - both metaphorically and literally.
  • "A Day in Riyadh": An Exhibition of History, Culture, Modernization & Reformation

    During the last week of September, immediately following the opening of the United Nations (UN) General Assembly in New York, a series of seminars, workshops and interactive displays collectively coined "A Day in Riyadh" was showcased at the UN.  This week-long "Riyadh Day" was sponsored by the High Commission for the Development of Arriyadh (Riyadh), and particularly featured the ongoing work of the Arriyadh (Riyadh) Development Authority (ADA).  As a Representative (Observer) for a Non-Governmental Organization (NGO) to the UN, and an attorney with an office in Saudi Arabia, Mr. Huf, Principal of JHI, was pleased and excited to attend.

    Riyadh (Saudi) Exhibition at the United Nations
    Focused on the capital city of Saudi Arabia (KSA, or the Kingdom) and the governate (province) of Riyadh, the series of presentations covered subjects relevant to the economy, culture, commerce and development of the entire Kingdom, and the Arab and Islamic worlds more generally.

    Of particular interest to those who follow this space will be the planned reformation of Riyadh's transportation system which, if fully executed, may be the single-largest public works project on earth during the period of construction. However, we will list all of the subjects covered by the panel presentations at the UN between September 27 - 30, to provide a broad look at the planned continued development of Riyadh (one of the chief purposes of the conference) which, in turn, may give us a better view of the Kingdom-wide social and economic reforms known as Saudi Arabia's "Vision 2030".

    Eng Khalid Al Hogail, CEO Saudi Public Transport Company  Saudi Nuclear Program  Arriyadh Development Authority

    9/27 "Riyadh:  Planning for People" - the overall City Plan (by 2030) moving forward, including details on Riyadh's new "Smart City" initiative.

    9/28 "Riyadh:  A Sustainable & People-Friendly City" - details concerning the Sustainable Development of Riyadh.

    9/29 "Riyadh:  On the Move" -  The King Abdulaziz Project for Riyadh Public Transport.

    9/30 "Riyadh:  Development of Civilization and Social Partnership" - Plans for the continued social, economic and intellectual development of the city's population in line with Islamic principles and the traditions of Arabia, particularly youth and especially young women, empowering them to take a more active role in the growth of the city and the future of the Kingdom as a whole.

    Dr. Sana H Alorf and Jason Huf
    (Jason Huf and Dr. Sana Alorf.  Dr. Sana is extraordinary, but not unique. She is a medical doctor working in Riyadh who also participates in many charitable and civic endeavors.  She volunteered, along with many other young Saudis, to travel to New York and talk about their culture, heritage and way of life in side bars at the exhibition.  Many ladies are taking up professions [including and increasingly fields such as law, medicine and science], starting businesses and participating in life outside their homes in the Kingdom.  Dr. Sana has a wealth of information that dispells many of the illusions concerning Saudi society and highlights the progress Saudi women have made - and continue to make.)

    The public transortation project, scheduled for completion in 2018, is a massive affair that could revolutionize life in Riyadh.  In addition to a new bus service, the project includes the construction of a commuter railway (Riyadh Metro) with six lines, dozens of stations, a main terminal for each line, and services areas at each stop, including large-scale shopping complexes at each of the main terminals.  Anticipating use by roughly 3.6 million residents daily, over 3,000 transport stands will be constructed to accomodate waiting commuters.

    With billions of Saudi Riyals being invested into the project, and given the rather brief time frame, this will generate a labor boom in the capital for qualified Saudis and expatriates.  Mr. Huf asked Eng. Hassan Al Musa, Deputy Director of the Transport Planning Department of the High Commission for the Development of Riyadh, if resources had been allocated to process what should be a substantial spike in Visa applications.  Potential contractors and subcontractors will be interested to know that the Deputy Director responded that his office is in touch with the Ministry of Labor on a regular basis as they set up for this contingency.  So long as employers comply with their filing requirements, he said, there should be no delays in the project caused by a labor shortage brought about by paperwork backlogs.

    Eng Hassan Al Musa and Jason Huf
    (Eng. Hassan Al Musa and Jason Huf.  Mr. Huf found him to be capable, earnest and modest.  Although entrusted with day-to-day management of a massive public works project that progresses under a tight schedule, he always gives credit to others, refering to his "Army" of dedicated public servants.  "That makes you a General", responded Mr. Huf, who later added, "Eng. Hassan is a nice guy".)

    In addition to the lifestyle transformation and relief of traffic congestion that will take place once this project is complete, young Saudis who are lacking in resources such as cars of their own will be able to much more easily venture beyond the confines of their own neighborhoods to look for satisfying work and important educational opportunities.  And, everyone who lives in Riyadh should enjoy the benefit of cleaner air arising from fewer cars on the highways.

    The entire program provided a window through which one could sample Saudi Arabia's Vision 2030, the rapid modernization and other wide-ranging reforms ordered by King Salman and spearheaded by Deputy Crown Prince Mohammed bin Salman, with the aim of guiding a modern but authentically Islamic Saudi Arabia that remains true to its people's history and traditions into a future "Post-Oil" economy.

    These reforms include the KSA's Sustainable Development program, which closely follows the UN's Sustainable Development Goals while keeping in conformity with Kingdom's Islamic principles; increased opportunities for youth & women; and, Saudi Arabia's nuclear power program.

    At JHI, we have offered our own modest suggestions for the shaping of such sweeping reforms, with an emphasis on attracting increased Foreign Direct Investment in the Saudi market.

    With an incoming US Administration that seems keen on utilizing America's energy resources; and, (if feasible) working with Russia to defeat ISIS (which, in addition to commiting henious atrocities, has been fighting forces led directly or indirectly by the Iranians), some may see such investment from the West as slow in coming, and the KSA's reception of it to be less-than-enthusiastic.

    Seen by some as signalling potential push-back against the further development of US energy resources and other recent or possible future policy changes, Prince Alaweed bin Talal of Kingdom Holding Company (Saudi Arabia's soverign investment apparatus) suggested selling holdings previously classified "not sellable" (such as shares in Citi Group and US Treasury bonds), which would be a divorce from Saudi Arabia's long-standing policy of having "buy-ins" in important American economic institutions and, thus, the American economy - effectively giving the US a stake in the KSA's existence and continued success.

    Noises concerning such potential push-back seem unlikely to stem the increased exploitation of US energy resources (another dip in the price of oil, for example, would seem more likely to give pause to an increase in US production).  And, the US-Saudi alliance of over seven decades, while fraying a bit over the last several years, should remain rather tightly tethered:  after ISIS is destroyed, a check on Iranian ambition will have been eliminated, and the US and the KSA will more clearly and simply share strong interests in containing Iran and managing increasingly complicated relationships with Russia.

    In fact, the strong relationships the KSA enjoys with the West, the interest Western countries have in seeing the continued modernization of Arab states, and Western companies' keen eye to continue - and, possibly increase - their investments in the Gulf region were reinforced recently by UK Prime Minister Theresa May in her mid-December visit to the Gulf Cooperation Council summit in Bahrain.

    Overview City Plan Riyadh 2030
    Pending changes to the Kingdom's commercial and corporate laws, which continue to be rolled out, and given at least one or two geopolitical uncertainties, JHI presently and on the whole views it likely that the environment for Foreign Investors will become even more attractive as the Vision 2030 reforms are implemented in the KSA.  As to the Great Social & Economic Reformation of the Kingdom known as "Saudi Arabia's Vision 2030", Mr. Huf doesn't think its on par with the Maji Restoration (the radical transformation experienced in Japan during the late 19th century), but he does see it as the most significant series of reforms in the history of the KSA since the reign of King Faisal (perhaps in the Kingdom's entire history - we'll see) and the most positive collection of developments to take place in the Arab world thus far in this new, turbulent 21st century - and, he certainly viewed the exhibition at the UN positively.

  • Ramadan Mubarak

    To all of our friends around the world who observe the Holy Month, we at JHI hope that you and your families enjoy a meaningful period of dedication to fasting, reflection and prayer during these historically challenging times.  May your loved ones take this holiday as an opportunity grow closer to each other, your neighbors, the less fortunate and the whole of humanity.

    We wish you good health in the year ahead.  Ramadan Mubarak!

    Sunset, Abu Dhabi, Corniche, Ramadan, Holy Month
  • Ramadan Mubarak

    To all of our friends around the world who observe the Holy Month, we at JHI hope that you and your families enjoy, and gain real value from, the meaningful aspects of an entire month dedicated to fasting, reflection and prayer - especially during these somewhat unsettled times.  May your loved ones take this holiday as an opportunity grow closer to each other, and humanity generally.  We wish you good health in the year ahead.

    JHI, Jason Huf, Middle East, Law Firm, International, Holiday, New York, NYC, Jeddah, KSA Saudi Arabia, Gulf, GCC, Legal, Commercial, Corporate, Banking, Holiday, Ramadan, Mubarak


    Ramadan Mubarak!

    - Jason Huf
  • Ramadan Mubarak

    To all of our friends around the world who observe the Holy Month, we at JHI hope that you and your families enjoy and gain value from the meaningful aspects of an entire month dedicated to prayer and fasting.  May your loved ones grow closer to each other, and humanity generally, during this time.  We wish you good health in the year ahead.

    Ramadan Mubarak!

    - Jason Huf
  • The City of Dreams, or the Emirate of Reality?

    From time to time, a trial balloon is floated in one GCC jurisdiction or another concerning the imposition of a new tax, whether it be an individual income tax, corporate tax or a value added tax.  The most recent of these is now floating over Dubai, which is still grappling with the residual effects of the 2008 crash while maintaining high levels of infrastructure spending.

    A prominent Emirati businessman based in Dubai publicly raised the idea of a corporate income tax in Dubai and voiced his general support for such an idea.  This is easily to understand, given the depletion of Dubai's oil reserves, the reversal of 2008 and resulting cash crunch, and the Emirate's continued high level of spending.  However, it would be somewhat akin to Killing the Goose that Laid the Golden Egg.

    Dubai rose up from the desert, transforming itself from a small trading post adjacent to Sharjah into the "City of Dreams", on the basis of its business-friendly laws, easy access to the oil-rich Gulf region, an unburdensome regulatory environment, quick access to financing and investment capital, and clever marketing revolving around the fact that the Emirate is Tax-Free

    While there are numerous government fees, paid annually, along with payments to sponsors, exceedingly high rental costs and other expenses one could say amount to a sort of taxation, companies and individual entrepreneurs from all over the world continue to flock to Dubai, drawn to the City of Dreams by the prospect of Tax-Free wealth.  Imposition of a corporate income tax could threaten this influx and inspire existing businesses to relocate elsewhere in the Gulf.  Even if such a tax were quickly repealled, reestablishing Dubai's image, carefully crafted and astutely marketed for many years, might be next to impossible.  And, isn't the real "Dream" not quick wealth, but having a broad-based economy not entirely dependent upon oil in the very heart of the Gulf region? 

    If Dubai is the City of Dreams, the "Green Capital" of the United Arab Emirates, Abu Dhabi, has been the Emirate of Reality.  With much of the UAE's energy resources, over half the country's population and land mass (much of it still undeveloped), and a very similar body of business law and regulations, and a robust banking industry, Abu Dhabi is also Tax-Free Abu Dhabi may not be known for a miraculous boom of the sort that made Dubai famous, but it has enjoyed steady, broad growth that has withstood the 2008 crash.
     
    Today, and not accidentally, Abu Dhabi is a leading target for foreign direct investment.  A corporate income tax in Dubai would not only enhance the relative attractiveness of Abu Dhabi to newcomers to the region, it might also encourage some of Dubai's existing businesses to take a two-hour drive and check out why the Emirate of Abu Dhabi is "green" in more ways than one.
  • Tracking Marcellus Shale Legislation

    On March 17, 2014, HB 1684 passed out of the Pennsylvania House of Representative's Environmental Resources and Energy Committee and now awaits the consideration of the whole House.  The bill seeks to define the term "post production costs" and mandates that deductions by gas producers/ lessees of natural gas rights cannot deduct for post production costs to the extent that the net royalty paid on extracted gas is reduced to below 12.5%.

    In its current form, the bill would provide that royalties for unconventional wells would be calculated when the gas enters the commercial marketplace, as ownership of the gas passes on to an unrelated entity (an entity "at arms length").  In the event such receiving/ purchasing entity does not meet the definition of "unrelated", the lessee/ producer has the burden of proof in showing that the royalty generated is at fair market value.

    HB 1684 also provides for a 12.5 percent "Minimum".  That is to say, post production costs cannot drive the royalty actually paid out after calculation to an amount below the 12.5 percent mark.  And, such post production costs will have to be itemized for the benefit of the owner in accordance with the guidelines set forth in the legislation.

    While the bill would affect current as well as future lease agreements, it does not retroactively impact royalties already paid out.  That said, this is especially important in light of a recent push to enforce "forced grouping" or "forced pooling" beyond the Utica region, into the gas-rich lands that are considered to fall within the Marcellus region.

    Forced Grouping is a something of a variation of eminent domain, wherein land owners who have not signed a deal to lease their gas rights are compelled to accept the deal given to a majority of their neighbors.  The underlying reasoning is simple:  Natural Gas is not segmented by the above-ground property line.  This means "hold-outs" can effectively hijack economically useful and beneficial production on an entire deposit, absent some provision such as forced grouping.

    Setting aside discussion of individual property rights vs the needs of society for the purposes of this one article, as a tangible matter the "fairness" of such compulsory grouping largely depends on the terms of the leasing agreements entered into by the majority of area landowners. 

    The arguments for forced grouping revolve around the economics of energy, fostering and encouraging production and keeping prices down for the ultimate end-user.  However, JHI believes that for the anticipated Marcellus Shale boom to be fully realized, the land owners who hold the rights to the gas beneath their feet must be full participants in such a boom.

    If it becomes law as presently drafted, this owner-friendly legislation will add greater credibility to gas producers/ lessees arguing in favor of the enforcement of forced grouping.

    While some folks are "hold-outs" for other reasons, in economic terms such might not necessarily be bad news for land owners who hold the rights to Marcellus Shale natural gas.  If you are such an owner, know your rights.  Gas producers/ lessees have top-shelf attorneys dedicated to pursuing the interests of these companies.  You should have a high quality lawyer guarding your rights and interests.

    In light of this new legislation, talk with your neighbors about a common strategy for moving forward.  JHI will continue to track developments in Pennsylvania law impacting the increasingly controversial and complex issues surrounding Marcellus Shale natural gas exploitation.