Contact us!
The Law Firm of

JASON HUF INTERNATIONAL, pc

"Exploring the Boundaries
 
of Your Business." 

______________________________

NEW YORK

11 Broadway, Suite 615
New York, New York
USA  10004
+1 (917) 775-0198 (p)
+1 (646) 395-1725 (f)

______________________________

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
______________________________

info@huflaw.com

Office Hours: By Appointment Only

Follow JHI
  • <iframe src="//www.facebook.com/plugins/follow?href=https://www.facebook.com/profile.php?i

  • @JasonHufIntl

 
Links

Big Brothers Big Sisters of Burlington, Camden & Gloucester Counties (NJ):

www.bbbsbcg.org


Salvation Army:

www.salvationarmy.org


Manar al-Athar:

www.manar-al-athar.ox.ac.uk



Doha
Abu Dhabi
Bahrain
Dubai
  • Saudi Arabia's Vision 2030 & "Riyadh Day" at the UN

    You are about to see a rapid-fire (for this space, anyway) succession of as yet unpublished updates covering a period from Spring 2016 to present.  We will start with an initial discussion of Saudi Arabia’s “Vision 2030”, touted as the most sweeping series of reforms in the Kingdom’s history.
     
    In a nutshell, Saudi Arabia’s Vision 2030 is a collection of planned economic and social reforms designed to construct a “Post-Oil” Saudi Arabia, in line with globally-held concepts of Sustainable Development. King Salman has invested his son, Deputy Crown Prince Mohammed bin Salman, with broad, sweeping powers to enable him, his advisors and other subordinates to design and execute these reforms between now and the target date of 2030.
     
    Within the stated goals of weaning the Kingdom (KSA) off of being an Oil-based economy and becoming an industrialized state, with greater Foreign Direct Investment (FDI), full employment for working-aged males, improved access to high-quality education, greater rights for women and a more liberal social structure generally, two items are immediately obvious:  we are seeing Riyadh’s intent to finalize the end the era wherein OPEC, the powerful cartel of oil-producing states, has been the world’s definitive maker of oil policy; and, a rapid and intense military build-up intended to strengthen a block of states that includes the KSA, Egypt and the smaller Gulf States determined to withstand growing Iranian and Russian influence in the Gulf region following continued declining US influence and interest there and in the greater Middle East.
     
    While JHI is not a policy think tank, we feel it is important to know the backdrop and overall purpose of any upcoming reforms.
     
    Our principle concern is FDI, and the impact any reforms may have on the attractiveness of FDI in the KSA. This program is still young, so specific laws and regulations impacting FDI are not yet in effect. For the time being, there is nothing set in concrete that a law firm can dissect for the benefit of its clients.
     
    Therefore, in our typical less-than-modest fashion, JHI offers some suggestions on how to make FDI in the KSA more attractive to potential investors:
     
    1.  The Corporate Income Tax should continue to be (gradually) lowered, and personal income tax should remain zero.  Although declining oil revenues and their impact on the national government’s budget needs to be addressed, increasing the number of companies investing in the KSA, rather than increasing the tax existing companies pay, seems the best way to address the current budget shortfalls giving rise to the KSA’s national debt.
     
    2.  Saudization is seen, by and large, as a form of tax by potential foreign investors. The best way to address the employment crisis in the KSA is not by compelling investors to hire Saudi nationals, but by making the hiring of them more attractive.  Foreign investors ordinarily love to avail themselves of a local workforce – after all, importing staff and finding housing for them is pretty darned expensive!  Many such imported workers do not know the language or withstand the culture shock very well.  Unfortunately, fairly or unfairly, the idea of hiring Saudis is generally considered unattractive, thus the current Saudization requirements.  Rather than increase these requirements, education should be improved and made more accessible, and a sense of work ethic (rather than entitlement) needs to be instilled in the Kingdom’s youth.  And, the world needs to actually KNOW of the existence of such an educated, hard-working labor pool – numbering in the millions, and proud of real accomplishment at the workplace.  Do this, and Saudization will no longer be necessary at all.
     
    3.  Make the process of obtaining a business license less burdensome and more efficient.  Telling clients that it could take a minimum of six (6) months to obtain the necessary documentation before proceeding with business activity tends to be something of a turn-off for them.  Additional agencies designed to steer and otherwise regulate foreign investment eases nothing and are simply additional "layers” of bureaucracy.  Streamlining, rather than adding to, the process of licensing incoming businesses would be a productive step.
     
    4.  Women’s rights, and human rights generally, should be broadened – and, can be without offending the Kingdom’s religious sensibilities or its historical traditions.  It is much easier, on multiple levels, for a company to invest in a country whose culture is not the focus of controversial discussions centered around notions of equality and individual human dignity.  Additionally, it is essential that people throughout the Kingdom feel some sense of “ownership” in their country and their respective futures (see, 2. above).  They need to feel that their rights are being protected by their government, not denied.  This isn’t a call for the overnight imposition of Jeffersonian democracy.  Quite the contrary:  JHI asserts that the keys to unlocking a more liberal social structure (without rocking the stability of the KSA) lay within the old tribal and other cultural traditions of the modern Kingdom.
     
    5.  The labor market, and the regulation of such, should be loosened, and greater rights should be provided to foreign “unskilled” laborers and household staff.  As above (see, 4.), this is a matter of conscious for many potential investors, as well as foreign professional staff who visit the KSA.
     
    6.  Banking reform is a must.  The KSA is one of the most – if not the most – “underbanked” markets on the face of the earth.  While new banks and fresh capital and competition need to be allowed in, stronger regulation and monitoring needs to be in place, giving rise to stronger internal compliance programs.  While banking needs to be more readily available in the KSA, companies and governments around the world also need to have more confidence in the country’s banks.
     
    7.  For local and foreign companies alike, receivables can be something of a headache in the KSA.  Its no secret that debt, and the collection of debt, can be problematic there.  As the Kingdom undertakes judicial reform, it should continue to consider the importance of the confidence a company can have in the investment it makes in Saudi Arabia.
     
    8.  One of the most crucial assets in play when investing in any country is a company’s intellectual property. Intellectual property protections and anti-piracy measures need to be greatly strengthened, and quickly.  It is important for any company (say, you sell shampoo and find yourself competing with a counterfeit knock-off of your product – that’s not good), but when looking to attract high-tech industries, especially, it is absolutely fundamental that such companies have confidence that intellectual property worth hundreds of millions, perhaps billions, of US dollars will not be stolen from them and effectively rendered next to worthless overnight.
     
    These are eight basic principle points upon which JHI would like to see the building of any reform package affecting FDI in the KSA.
     
    JHI will track any concrete steps within this subject, and Mr. Huf hopes to learn more when “Riyadh Day” (its actually a week of symposiums, workshops and other such meetings), sponsored by the KSA’s High Commission for the Development of Riyadh, is held at the United Nations in New York at the end of September.
  • Arbitration Clauses in Multi-National Agreements

    Arbitration clauses are often heavily negotiated and complex enough to be referred to as “a contract within the contract”.  The reasons for this are obvious (even to us transactional practitioners).  The exact terms of a dispute resolution clause can have far-reaching consequences.

    One of the goals in crafting such a clause is to mitigate the irreconcilability of disputes as they arise by putting your client in the best possible position in the event of a scenario that triggers termination and subsequent arbitration.  Naturally, both sides have this in mind during negotiations.  But, what happens in jurisdictions where the enforceability of arbitration clauses may be considered by some, fairly or unfairly, to be a somewhat unsettled question?

    Until recently, while the Kingdom of Saudi Arabia (or, KSA) has been a member to the New York Convention (on the enforcement of arbitral awards), this did not always lead one to predict with certainty that a Saudi court would recognize the validity of the arbitration clause in your agreement with a local party and direct that party to resort to arbitration, as per your agreement.  In the past, senior judicial officials and other legal professionals in Saudi Arabia have on occasion issued public pronouncements that arbitration clauses are contrary to Shari’ah and are therefore invalid, and should not be enforced by Saudi courts.

    That is to say, in Saudi Arabia you may have had the right to enforce an arbitral award granted by a tribunal (keeping in mind the difficulty some may experience in attempting actual collection in the Kingdom), but such public pronouncements may have lead some to wonder if you could successfully assert that the underlying dispute be entered into arbitration in the first place (in the KSA), depending on whether or not the judge in the Saudi court deciding the question deemed your particular arbitration clause (or, arbitration clauses generally) to be appropriate under, or contrary to, Shari'ah.

    Today, some are hopeful that the passage of the KSA's new Arbitration Law of 2012 (
    based on the UNCITRAL Model Arbitration Law) to supplant the KSA Arbitration Law of 1983, and the creation of judicial training centers and the subsequent appointment of judges to serve in a new commercial court system in the KSA, will lead to greater clarity on the subject of the enforcement of arbitration clauses.  As with any legal reform, time will tell.

    In the neighboring United Arab Emirates (UAE), the considerations differ.  The validity of the arbitration clause, the formation of the contact, and the nature of the relationship between the parties themselves are just a few of the considerations that a court could measure in weighing the enforceability of a given arbitration clause.

    Any Emirati national (individual or corporate) has the right to avail itself of the protection and justice of the courts of the UAE.  In the past, this may have prompted some local parties in the UAE to move that a local court should assert jurisdiction, despite the existence of an arbitration clause.  It should be said, however, that in the UAE (a commercial hub in the Gulf region that has become famous for the "City of Dreams", Dubai, and increasingly the "Green Emirate" of Abu Dhabi), such motions should rely on more than this basic right if a party wishes to succeed in its attempt to escape arbitration under a valid clause.

    Following certain provisions of the UAE (federal) Civil Code, judges in local courts should hold that validly written arbitration clauses are enforceable, except when there exist particular circumstances.  For example, in disputes arising from registered commercial agency agreements a judge may deem an otherwise valid arbitration clause unenforceable and declare it void on the grounds that clauses calling for alternative dispute resolution (or, ADR) in such contracts are contrary to, or inconsistent with, "Public Policy".  (Please note: the commonly used, colloquial term "sponsorship agreement" is much broader and could refer to several different types of business relationships in the UAE; whereas, "registered commercial agency agreements" refers to a specific type of business relationship, which must also be properly registered with the relevant government office in accordance with both the law and the terms stipulated in the agreement itself.)

    So, what do you do when doing business internationally, and some of your relationships are with parties in the Middle East?

    Negotiate an arbitration clause.

    And, retain an experienced attorney with local knowledge (preferably one with a presence in the specific jurisdiction in question: the laws of Middle Eastern jurisdictions, like the laws of countries in other regions of the world, are subject to change).

    If the local party with which your company is doing business has attachable assets outside of the Middle East in a country where collections may be deemed less frustrating, that can be a plus.  But, as with just about everything else, there is no substitute for experience -- and solid, relevant legal experience may be one of your best assets at the negotiating table.

  • 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.

  • Judicial Reform in Saudi Arabia

    The government of the Kingdom of Saudi Arabia (KSA) recently announced its intention to establish training centers for judges.  Such training centers will be administered by the KSA Ministry of Justice.  This comes on the heels of King Abdullah's creation of 5,000 new judgeships in the KSA, and is accompanied by vocal opposition from the Kingdom's more traditional, conservative quarters.

    For years, the commercial community in the KSA (both local and foreign) has expressed a need for greater transparency in Saudi courts.  Procedurally and substantively, a perceived lack of predictability has resulted in a chilling effect on commerce in the KSA.

    Arbitration clauses in contracts are of uncertain enforceability in the KSA, as senior judicial officials have, in the past, deemed such clauses to be "contrary to Shari'ah".  Accordingly, irrespective of any arbitration clause in any business arrangement entered into, in the event of an irresolvable conflict between the parties one could reasonably expect such a dispute to be adjudicated before a Saudi court.


    The uncertain enforceability of arbitration clauses and perceived unpredictability of the courts have combined to generate something of a chilling effect on investment in the KSA.  Meanwhile, Gulf Cooperation Council (GCC) provisions that call for entities native to any GCC Member State to be treated as a local company by the governments of each of the other Member States
    have added to the investment boom in smaller Gulf countries such as Qatar and the United Arab Emirates: some companies enter those jurisdictions in the hope that, at some point, they might be able to access the much larger Saudi market without completely exposing their investment (or, their employees) to the Saudi legal system.

    It is hoped by many in the commercial community that the addition of 5,000 new judges, uniformly trained in the enforcement of commercial and corporate law, will improve the overall business environment in the KSA by generating a greater sense of transparency and predictability in the courts.

    The details are as yet unknown; and, conservative elements who view laws and their interpretation as coming from God, not precedent, statute or human beings generally, still have opportunities to oppose the establishment and effective administration of such training centers.
      JHI will continue to track such developments as they arise.