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JASON HUF INTERNATIONAL, pc

"Exploring the Boundaries
 
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New York, New York
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+1 (646) 395-1725 (f)

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JEDDAH

Khalil Khazindar Law Firm
in Association with
JASON HUF INTERNATIONAL pc
Ammar Commercial Center

Al Murjan Street (off of King Abdul Aziz Street), Office # 202
P.O. Box 157,  Jeddah  21411
Kingdom of Saudi Arabia
+966 (2) 4204763 (p)
+966 (2) 4204729 (f)
www.khazindarlaw.com
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  • Happy Eid Al Adha Wishes, Plus a Major Improvement at JHI

    The Law Firm of Jason Huf International (JHI) wishes all of our friends around the Muslim world a happy Eid Al Adha.  As pilgrims from all over the world celebrate the completion of one of Islam's most cherished Holy Rites, I am pleased to announce that JHI has successfully finished a journey of its own:

    Last year, we published a discussion of JHI's business model, "Big Firm Resources Without the Massive Overhead", which described the broad range of resources made available to JHI's clients in a manner that keeps our costs competitive.  From the the firm's beginning, my goal was craft a business model that made the provision of legal services more efficient and client-friendly.

    At JHI's 5-Year Anniversary gathering last month, I unveiled news of a critical development toward my continual commitment to achieve this goal.  As planned from its foundation, JHI's New York City presence is now a purely "virtual" one.

    When I started JHI, there was simply no substitute for "Being There" - I had to be in Manhattan, day in and day out.  Now that I've established myself as the "Mr. Middle East of Lower Manhattan", the brick and mortar facility formerly known as The Monastery is no longer necessary.  As planned from the jump, JHI will maintain the advertised address at Suite 615 of 11 Broadway as a mail stop and shared services facility, but will no longer have to bear the expense of fully operational and staffed physical plant elsewhere Downtown.

    While time zone differences and varying work weeks in different cultures are still a factor, technology makes it possible for me to run my practice from anywhere in the world.  Physical plant will always be necessary in Jeddah, Saudi Arabia & our associated office at the Khalil Khazindar Firm remains unchanged.  JHI also maintains additional resources, including VAT practitioners and experienced litigators/ arbitrators, in the United Arab Emirates (UAE - Abu Dhabi & Dubai), India and Singapore.  However, having successfully planted our flag in the Big Apple, I can now execute the original plan for the firm's business structure by operating from New York City on a purely "virtual" basis, and do so in a manner wherein JHI keeps its access to a wide network of attorneys working in a broad range of practice areas.

    In short, with overhead even lower than before, JHI's rates will remain competitive; and, we still provide clients with seamless access to "Big Firm" resources in a way that is extremely economical.

    From my own perspective, a total of over four hours of commute time, round trip daily, can now be used for more productive purposes.  Whether its additional billable time, special projects unrelated to my practice or simple relaxation necessary to maintain work-life balance, that's more than 20 hours per week that I will devote to, well, whatever I want...
                                                                                                                   R. Jason Huf, Attorney-at-Leisure, New York & Jeddah, Saudi Arabia

    Though I will be back from time to time as business requires, I already miss taking occassional breaks in Battery Park.  Working from the office in my home is certainly an adjustment.  I may write books, teach, put more focus into booking public speaking engagements, or just sit in the back yard and read for fun (I haven't read for fun in years).  I may even become active/ reengage in politics.

    I will almost certainly travel more often to points East.  Not being grafted to a desk two hours from my house on a near-daily basis will make such travel more feasible.  I view this as critical as JHI enhances its capabilities in Saudi Arabia, the UAE and throughout the Gulf (GCC) region, and becomes the GCC-wide "Regional Super Firm" I set out to establish five years ago.

    So, it seems exploring the boundaries of my own business will further enable JHI to help our clients (you and your company, I hope) to Explore the Boundaries of Your Business.  I couldn't be more pleased.

    Happy Eid Al Adha!

     – Jason Huf
    Thursday, August 16, 2018
    "Parts Unknown", USA
  • With a New VAT, is the UAE Still the "Place to Be"?

    Commensurate with its Gulf Cooperation Council (GCC) obligations, the United Arab Emirates (UAE) will fully-implement the Federal-level imposition of a Value Added Tax (VAT) of 5% on most goods and services, and associated registration and reporting requirements, along with Excise Taxes on certain goods (50% on "fizzy drinks" & 100% on energy drinks and tobacco products), effective January 1, 2018.

    Some industries are exempt from responsibility for VAT by statute, such as certain transportation services and basic healthcare providers.  Real estate transactions within the first three years (thus far) of the law's enforcement are also exempt from VAT in the UAE.

    Companies doing business in any of the Emirates who are not in an exempted industry and whose turnover exceeds the statutory threshold (AED 375,000 over a period of 12 months) were required to register for VAT by December 4, 2017, or face a penalty.  In future, companies whose turnover does not yet exceed the statutory threshold will have to become compliant within one month of achieveing such turnover during a 12 month period.  Companies who are not yet required to register and report for VAT may apply to do so voluntarily, provided their 12 month turnover exceeds AED 175,500.  If a company anticipates exceeding the mandatory threshold in the future, then voluntary registration may be advisable so that a future 30 day deadline will not present potential difficulties.

    Initial estimates are that approximately 350,000 companies will have registered for VAT in the UAE by the statutorily stipulated date.  An exact figure is not yet available.

    Reporting/ filing of returns will be performed on a quarterly basis.  This may precipitate retaining Registered Tax Agents (and, JHI recommends that reporting companies retain such professional services). 

    Naturally, being a new law, regulations, clarifications and other factors affecting implementation of and compliance with the new laws (UAE Federal Laws 7, 8 & 13 of 2017) remain subject to change at this stage.  The UAE Ministry of Finance provides this page to provide basic information, timely updates and a starting point for researching and tracking the new tax regime:

    https://www.mof.gov.ae/En/budget/Pages/VATQuestions.aspx 

    One issue that begs for near-term clarification is the question of taxability of Free Zone entities. At the time of this writing, the responsibility for actual payment of VAT by entities established in Free Zones, including "Financial Free Zones" (such as the Dubai International Financial Centre, or DIFC; or, the Abu Dhabi Global Market, or ADGM), remains somewhat unclear.  For example, following current guidance from the Federal Tax Authority (FTA), the agency with primary responsibility for the enforcement of VAT, such entities should be registered for VAT if their turnover exceeds the mandatory threshold. On the other hand, by Emiri decree (issued under a recent Constitutional provision), a 50 Year Tax Holiday has been established for the ADGM (measured from the effective date of the underlying law).

    The UAE Cabinet has not yet issued its decision identifying any "Designated Zone" (wherein established entities may receive at least some partial or limited form of exemption from VAT) as the law empowers it to do, and the issue of responsibility for payment by companies in Financial Free Zones involves something of a Constitutional question. However, as stated above, it is hoped that additional clarifications may be issued by the relevant authorities in the near future.  It is also worth noting that the FTA's determinations/ decisions can be challenged through the courts, provided there is a credible legal basis for such a challenge.

    Being a brand new area of law, such gray areas are to be expected.  The drafters of the new laws concerning VAT certainly seem to have expected this, as certain mechanisms - such as the ability to challenge FTA policy decisions in court - are built into the new tax regime to ensure transparency and fairness (important factors in any healthy business environment) as and when important issues are sorted.

    Thinking more globally, one wonders what this may do to the famously business-friendly reputation the UAE has enjoyed for decades.  After all, "the (tax-free) UAE is the Place to Be" in the Gulf region.  JHI believes that the imposition of the VAT, in and of itself, will not severly impact the UAE's positive business environment. 

    The imposition of VAT is a GCC-wide program, agreed upon by the member states.  The level of tax will be 5% across the board, and goods and services exempt from the tax will be similar almost to the point of being mirrored from jurisdiction to jurisdiction.  Compliance steps and associated costs should be roughly equal in each of the member states.  And, the timing of full VAT implementation in the member states should coincide (the Kingdom of Saudi Arabia, for example, is also introducing its new VAT in January of 2018).  So, this should not significantly reduce the attractiveness of the UAE for investors, nor does it seem likely to impact the UAE's role as a gateway into the other GCC economies (such as Saudi Arabia - the largest economy in the GCC).

    As a GCC member state, the UAE has agreed, and is obligated, to impose VAT. With recent fluctuations in the price of oil and the recent military build-up, in addition to the maintenance of basic services, additional revenues are needed to keep the national debt at a sustainable level.

    The broadening of the UAE's economy in recent years has provided an opportune situation wherein the imposition of VAT (as opposed to other taxes and/ or fees) makes sense.  On paper, it seems the best available method of helping to keep the UAE's fiscal ship steady.  Although it will contribute an additional layer of expense onto the costs of living and doing business in the UAE, the UAE enforces no other tax and the compliance costs associated with the UAE's regulatory environment are among the least burdensome in the world.  As to the pre-VAT cost of living and doing business in the UAE (such as real estate, some services and many goods), much of this is due to high demand brought about by a decades-long strong international interest in participating in the UAE market.

    Further, the UAE, with a low-cost regulatory environment and a mere 5% VAT, seems poised to remain the gateway to one of the fastest growing regional economies in the world.  JHI believes that for businesses who view the GCC as an attractive area for investment, the UAE will continue to flourish as a "starting-off" or set-up point for such investment, and at a time when the economies of the GCC may be poised for potentially explosive growth during a revolutionary time of profound reforms throughout the region, particularly in Kingdom of Saudi Arabia.

    JHI will continue to monitor the situation, and track legal developments concerning the implementation of the VAT, in the UAE and throughout the GCC.

    Jason Huf, Principal, JHI, Law Firm, NYC, KSA, Jeddah, Saudi Arabia, UAE, VAT, Excise, Tax, Finance, International, Middle East, Law, Legal   (Mr. Huf gratefully acknowledges the contributions to this brief note by his good friend Sreekumar Radikrishnan of Goodwins Law Corporation's Abu Dhabi office. Mr. Huf calls Prof. Radhakrishnan his "top Go-To guy" in the UAE - especially on new tax matters:  http://www.goodwinslaw.ae/about-us/our-team/sreekumar-radhakrishnan

    This website and its contents - taken in whole or in part - are a law firm advertisement.  As with all other entries in the blog section of JHI's website, this article is intended to contribute to public discussion and is published for and distributed to a rather general audience.  This article is not legal advice and should not be mistaken for such.

    In the event legal advice is needed on the subject of VAT in the UAE, Mr. Huf & JHI will be happy to introduce and refer any such client to Prof. Radhakrishnan & Goodwins for his personal attention.

    Finally, Mr. Huf also wishes to make clear that any opinions expressed herein are solely those of Jason Huf & JHI.)

  • Big Firm Resources Without the Massive Overhead

    By R. Jason Huf

    Some of you may have obtained entry to the "Monastery" (as I've taken to calling my office) as and when business has required. However, for most of those reading this, I realize that I'm letting you in on a little secret: the advertised address of JHI's NYC HQ office is just a mail stop associated with a shared space & services operation on the 6th floor of good old 11 Broadway.  To maintain my strict "No Pop-Ins" Policy, the exact location of the Firm Headquarters Office/ Monastery's actual physical presence is kept confidential, and that confidence is only breached when necessary.

    Being able to advertise the mail stop as the office address, and the convenience of renting conference room space by the hour on the 6th floor, both enable me to concentrate on my work with minimal interruption.  In addition to this "buffer", availing myself of the shared services when certain tasks need to be performed rather efficiently assists me with keeping costs down, which in turn contributes to my ability to maintaining hourly rates that are very competitive.

    The World is Yours (As an old boss of mine used to say, "This is not the Fish Market"; but, with our competitive rates and innovative price structures, there may not be much need for you to bargain when seeking high-quality, world-class International Legal Services that your company can afford)


    Perhaps most fundamentally to those of you (still) reading this piece, JHI can make available to your company the seamless provision of professional services spanning just about the entire legal prism, without having to figure massive overhead costs into our hourly rates (or more innovative billing arrangements). The outfit that runs the 6th floor operation only caters to attorneys, and many of these attorneys elect to house their firms and solo practices in physical office space on the site. Irrespective of the level of their arrangement, all who participate in some form or another are listed in a directory and, over time, some of us get to know each other reasonably well.

    These attorneys practice in virtually every area of the law, and possess a variety of experience levels. In short, I have at my fingertips a storehouse of legal minds to draw upon, from commercial real estate specialists, to business litigators, to tax professionals - even a very smart fellow who focuses on energy trading. And, like myself, they tend to maintain a relatively unburdensome level of overhead costs, which in turn, permits them to be reasonable with their fees as well.

    A few people still tend to think of my practice as rather narrow, until I dispell them of that illusion - JHI is a Commercial, Corporate, Energy & Banking law firm and we perform a wide range of services for clients hailing from a broad variety of industries.  We just happen to have extensive experience in the Middle East, which may occassionally give rise to some folks instinctively thinking of JHI as a boutique servicing a particular "specialty" area.  However, JHI's capabilities are even broader than I previously reasoned:

    Between the NYC HQ, our Jeddah, Saudi Arabia Office, additional reources in the UAE (Abu Dhabi & Dubai) and access to Singapore and various major cities in India, JHI as a Brand is known as a capable provider of professional services in the Middle East and South Asia, ranging from company formation to arbitration, for those who have invested - or are looking to invest - in those regions in the world.

    What JHI is not (yet) necessarily known for is our ability to assist businesses based in the Middle East and elsewhere with their expansion into the US "mega-market". Whether you are an individual foreign investor entering through the EB-5 Visa process, or a family-owned conglomerate of businesses looking to invest in US real estate, or a publicly traded company in Riyadh entering a joint venture, or a participant in the new US public-private partnerships designed to reform the nation's infrastructure, JHI is well-placed to help get you started as well as protect your US-side business interests down the road.

    We have access to an entire network of intellectual assets encompassing a variety of practice areas ordinarily comanded only by big law firms, without having to factor "big firm" overhead into our fees. So, when investing from West to East, or East to West, consider the cost-effective but powerful option of contacting JHI for your legal needs.

    Feel the difference and put our NYC HQ and affiliated Community of Attorneys to work for you in concert with our Jeddah office and/ or resources in the UAE, India & Singapore (wherever you're from!) as we help you and your company Explore the Boundaries of Your Business.

     – Jason Huf
    Wednesday, August 8, 2017
    New York, NY

  • A Deal's a Deal. Right?

    In the Middle East, the old joke among Western lawyers goes something like this:  “First you negotiate the contract, then you close the contract. And then, you renegotiate the contract… ”

    All good jokes are rooted in the truth.  While there certainly are some local parties in the Middle East who are committed to keeping their word and sticking to the deal they negotiated, there does exist this unfortunately common dynamic wherein the local party will test, stretch and even flat-out ignore the terms of an agreement they just executed.  One might even lose money betting against a breach occurring before the ink dries.

    And yet, throughout the Gulf Cooperation Council (GCC) region, billions of (US) dollars worth of business is successfully transacted each and every year by and between foreign and local parties.  How does that work?

    It starts with understanding what local businessmen already know:  going to court, dumping your local agent (or, colloquially speaking, your “sponsor”), etc, are usually your last best options.  You can see your company effectively frozen out of the market if you make such a move without an almost perfect sense of deftness.  And, even if eventually successful, should your company go this route, you have embarked on a long, aggravating and expensive disruption of business that will give rise to discussions that start with, “Why don’t we just pull out of there?”

    We will talk about arbitration clauses (and, the enforceability of them in GCC jurisdictions) in a subsequent posting.  For now, you also need to understand that the local sponsor, or other local parties with whom your company does business, who busies himself with stretching the terms of your agreement is primarily (if not entirely) in the business of sponsoring foreign enterprises (or otherwise makes his money conducting business with foreign parties).  Maintaining sponsorships or other replationships with foreign investors (and, protecting their reputations and pride) tend to be the top priorities of local companies.  So, when such companies appear to breach their agreements, what do they hope to gain by playing around?

    Usually, more money.  And, usually, not much more.  More often than not, you can settle the matter by amending a couple of terms and (slightly) goosing up their sponsorship “fee” (or, whatever other payment, profit or compensation they may be receiving).

    What about the law of contracts?  Why can’t I look for a new sponsor and/ or seek judicial recourse?

    Remember that the laws requiring you to obtain a sponsor in the first place are protectionist in nature.  On an unofficial level, shopping around for more pliant for cooperative sponsors isn’t designed to be easy.

    Also, while consideration, reliance and other concepts are necessary to show a promise made in contract is enforceable under the laws of the United Arab Emirates (UAE), such is not the case to show the existence of an enforceable contract in Saudi Arabia (KSA).  In the KSA, if you make a promise, you’re stuck with it.

    Isn’t the other side stuck with it, too???

    Well, in the Middle East, there is the law the way it is written, and the law the way its enforced.  And, to further complicate things, that which is enforced is not always written, and that which is written is not always enforced.  If you wind up in a KSA court, you may have a judge whose primary concern is sending a signal to his government, more than adjudicating a dispute between the parties before him.  In the UAE, much may depend on whether the judge enjoyed his breakfast, or if he is miserable from a belly ache, as he reads your company’s brief… (And, keep in mind, the UAE imports its judges from other countries – those judges tend to be mindful of who gave them their jobs.)

    As to getting another sponsor, while the UAE and the individual Emirates therein may not employ “black lists” per se (as does the KSA), you should nonetheless do your best to avoid running afoul of bureaucrats at relevant ministries and other governmental offices who may have a cousin, friend, or other acquaintance who may just happen to be your soon-to-be former sponsor or other business partner/ associate.  Business licenses have to be renewed every year, and your specific business may well depend on successfully bidding on government tenders; and, while Abu Dhabi and Dubai, for example, may look like big cities, they still very much operate as “small towns” on many different levels.

    That’s not to say successfully changing your sponsor and/ or winning a contractual dispute with a local party in the Middle East is impossible.  Such has been known to happen in Abu Dhabi, and even in Jeddah (where arbitration clauses are less likely to be deemed enforceable by local courts, even though the KSA is a party to the New York Convention).  Accordingly, you should protect yourself in the governing documentation the way you would in any other international agreement.

    Have the standard choice of law, venue, and language clauses, as well an arbitration clause (which can be something of a contract unto itself) and, especially, a (carefully written) termination clause.  If an American-based company (or, even if you are based in another Western country but have operations in the US), make sure the documentation includes language concerning your refusal to violate the provisions of the US Foreign Corrupt Practices Act (over the last several years, the trend has been increasingly robust enforcement of the FCPA).  American companies might also think to include a so-called “anti-boycott” clause in the agreement, given the on again/ off again enforcement of boycotts against Israel by some Arab states.

    Although the general mood in the GCC seems to favor a direction wherein the laws are being changed to relax the hold local parties (especially those deemed “sponsors”) have over foreign direct investment in their respective markets/ jurisdictions, it is usually best to try to renegotiate when a breach occurs.  Such renegotiation should, generally speaking, settle upon a slight increase in the amount of earnings the local party derives from the deal.

  • Its Fracking Summertime

    Between the July 4 weekend and other summer holidays, high summer in the Middle East, the holy month of Ramadan, and some sort of soccer tournament, we find ourselves in the unusual position of having a little free time here at JHI.

    As such, watch THIS SPACE:  In the coming weeks, JHI will post a brief article right here in our Notes & Comments section on Hydraulic Fracturing (colloquially referred to as “Fracking”).

    Following Labor Day, JHI will publish a brief note on contracting with parties in Middle Eastern jurisdictions (in particular, Saudi Arabia (KSA) and the United Arab Emirates(UAE)); and, in a subsequent writing, JHI will share some thoughts on Arbitration Clauses when doing business internationally.

    And, while there tends not to be many developments in the law anywhere in world during these summer months, JHI will continue to keep our eyes peeling concerning such developments as and when they affect Marcellus Shale Natural Gas, Charter Schools, Municipalities, Middle Eastern jurisdictions (particularly Gulf Cooperation Council jurisdictions), the law of Contracts, the laws of New York, New Jersey, Pennsylvania, the UAE (Abu Dhabi and Dubai) and the KSA, and business law generally.

    In the meantime, we would just like to wish all concerned a safe and happy summertime!