Attorneys tell business owners how to catch ride on UAE...

Week of March 28-April 3, 2008
Attorneys tell business owners how to catch ride on UAE train
28
Houston Business Journal
houston.bizjournals.com
Week of March 28–April 3, 2008
DATELINE: DUBAI
by Camille Tarics
Special to Houston Business Journal
As “plastics” was the watchword for Dustin Hoffman’s character in “The
Graduate,” the watchword for the coming years could still be “Dubai.”
Business opportunities abound in the tiny emirate, according to Bracewell & Giuliani LLP attorneys David Stockwell, Ron Erlichman and John
Couch, who recently conducted a seminar in the firm’s Houston offices on
doing business in the UAE.
Stockwell calls Dubai the most prominent of the emirates, “a huge
catchbasin for wealth for the world . . . If you can’t make money in the
Gulf right now, you can’t make money anywhere,” he says.
Businesses can readily set up separate limited-liability entities in free
trade zones and enjoy complete freedom to run their businesses without a
foreign agent or foreign ownership, the attorneys explained.
“Think of it as like being offshore” says Erlichman. Each free zone has
its own rules and regulations, but on the whole they are less bureaucratic
and more business-friendly than the rest of Dubai, making it quicker and
simpler to set up a business there.
However, free zone businesses have a significant territorial limitation.
“You can do business in the free zone and from the free zone everywhere
else, but not in the rest of the emirates”, explains Couch.
To operate in the rest of Dubai, businesses may conduct indirect
operations via a representative office or a commercial agency agreement,
or they may elect to establish a permanent legal presence by forming a
UAE entity. Due to a change in the law, opening a branch office is no
longer feasible.
A commercial agency agreement means that a local UAE-owned
company sells for the company it represents. These agreements are
exclusive and are territorially based. One emirate is the minimum area.
A company can be subject to a suit for infringement if it brings in goods
through someone else.
Commercial agency arrangements are easy to get into but can be
difficult to get out of. If problems arise, they can end up being expensive.
For example, if a company has a dispute with its agent, the agent can block
import of the company’s goods until the dispute is resolved.
Liability can also be a problem. Couch cautions that “your agent is no
more than yourself in a foreign zone, and you will be liable” for acts the
agent commits.
Previously, agency agreements were required to be evergreen. Now a
term can be specified. But if a company doesn’t renew, it may still face
claims from a disgruntled former agent who demands compensation.
Canceling an agency agreement during the term is virtually impossible.
Conducting direct operations by means of a UAE entity requires 51
percent equity ownership by a UAE national. Although the foreign partner
Ras Laffan LNG Operations
Company
Shareholders
Stake
RasGasI
Qatar Petroleum
Exxon Mobil
Itochu Iwai Corp.
Korea Gas Corp.
Nissho Iwai Corp.
63
25
3
5
4
Trains 1 & 2
6.6 mtpa
RasGas II
Qatar Petroleum
Exxon Mobil
70
30
Trains 3, 4 & 5
31.1 mtpa
RasGas III*
Qatar Petroleum
Exxon Mobil
70
30
Trains 6 & 7
15.6 mtpa
Qatargas I
Qatar Petroleum
Total SA
Exxon Mobil
Mitsui
Marubeni
Trains 1, 2 & 3
9.7 mtpa
Qatargas II
Qatar Petroleum
Exxon Mobil
70
30
Train 4
15.6 mtpa
(combined)
Qatar Petroleum
Exxon Mobil
Total SA
65
18.3
16.7
Train 5
Qatargas III*
Qatar Petroleum
Conoco Phillips
Mitsui
68.5
30
1.5
Train 6
7.8 mtpa
Qatargas IV*
Qatar Petroleum
Shell
70
30
Train 7
7.8 mtpa
Facilities in green are under construction
* LNG bound for U.S. (Golden Pass)
Trains
Capacity
(million tonnes/yr)
Source: Qatar Petroleum
Attorneys tell business owners
how to catch ride on UAE train
may be required to put up the money, the UAE national must receive 51
percent of the profits.
“We’re not talking about straw men,” says Couch. If the structure is
ruled
a TARICS
sham, the company can lose 51 percent
of its investment.
A commercial
agency agreement
BY CAMILLE
means
that a localagreements
UAE-owned company
SPECIAL
TO HOUSTON
BUSINESS JOURNAL
Both
agency
agreements and direct
operations
require
sells for the company it represents. These
careful structuring as to dispute resolution.
As “plastics” was the watchword for agreements are exclusive and are territori“WeHoffman’s
do not recommend
litigation
the
courts
Dubai,”
emphasized
based.
Oneofemirate
is the
minimum
Dustin
character in “The
Grad- inally
Couch,
ifthe
dealing
area. national.”
A company can be subject to a suit for
uate,” the“especially
watchword for
comingwith
yearsa UAE
infringement if it brings in goods through
could still be “Dubai.”
Business opportunities abound in the someone else.
Commercial agency arrangements are
tiny emirate, according to Bracewell &
Camille
Tarics
is David
a Houston-based
freelance
writer.
to get into
but can be difficult to get
Giuliani LLP
attorneys
Stockwell, easy
Ron Ehrlichman and John Couch, who re- out of. If problems arise, they can end up
cently conducted a seminar in the firm’s being expensive. For example, if a compaHouston offices on doing business in the ny has a dispute with its agent, the agent
can block import of the company’s goods
United Arab Republics.
Stockwell calls Dubai the most promi- until the dispute is resolved.
Reprinted for web use with permission from the Houston
Journal.
all rights reserved.
Liability can also be a problem. Couch
nentBusiness
of the emirates,
“a ©2008,
huge catchbasin
Reprinted by Scoop ReprintSource
1-800-767-3263.
for wealth
for the world . . . If you can’t cautions that “your agent is no more than
make money in the Gulf right now, you yourself in a foreign zone, and you will be
liable” for acts the agent commits.
can’t make money anywhere,” he says.
Previously, agency agreements were reBusinesses can readily set up separate
limited-liability entities in free trade zones quired to be evergreen. Now a term can be
and enjoy complete freedom to run their specified. But if a company doesn’t renew,