Cultural and Political Issues in the Middle East
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The document discusses some of the cultural and political issues that must be considered for energy and infrastructure projects in the Middle East. Local sponsors may be bound by local laws and public policy requirements under Shari'ah law. Local content requirements may necessitate partnerships with local contractors, who have differing business practices and cultural norms. Contracts must account for local religious festivals and holidays. Splitting contracts requires careful structuring to ensure compliance with local laws. Managing claims and contractual security also requires understanding local evidentiary rules and enforcement of arbitral awards.
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Cultural and Political Issues in the Middle East
- 1. Cultural and Political Issues in the Middle East Francis Ho, Senior Associate Energy & Infrastructure Projects in the Middle East e-mail: fho@kslaw.com Hilton Abu Dhabi, UAE Phone: +971 2 652 3426 18 February 2010 Mobile: +971 50 557 0446
- 2. Local Sponsors • May be bound by local laws regarding jurisdiction and dispute resolution forum (e.g. Board of Grievances in Saudi Arabia) • Public policy requirements – Prohibition of speculation – Prohibition of gambling – Other forbidden practices under Shari’ah law • May be influenced by politics - e.g. embargo on use of Israeli goods and services
- 3. Local Contractors • Local content requirement may necessitate joint ventures with local parties – Advantages and disadvantages – Risk of lack of expertise – Cultural incompatibility - differing localised business practices • Appropriate security for performance required • Consider religious festivals and holidays: – Eid al-Fitr – Eid al-Adha – Ramadan – Summertime working hours
- 4. Split EPC Contracts • Splitting EPC contract into on and off shore works can have tax advantages • Where there is a split EPC developer/ owner will generally request “wrap” or “bridging” agreement which: – takes precedence over split contracts – provides for joint and several liability of on and off shore contractors – contains liquidated damages provision for the late performance of entire EPC works – contains overriding dispute resolution clause • Imperative for parties to obtain local law advice to ensure contract structure is compliant with local laws
- 5. Contract Administration and Expectations • Consider relevant legal regime - applicability of notices as condition precedent to claim – Guillotine provisions? • Civil law jurisdictions – Obligations of good faith and cooperation
- 6. Managing Claims • Evidentiary issues in international projects – Without prejudice privilege – Local rules of evidence – GCC civil code jurisdictions - only disclose those documents requested by other side – Disclosure during mediation may be used in subsequent proceedings • Managing contractual security – Performance bonds and standby letters of credit • Notice? • Evidence? • When to call? • On demand? • Revocable/irrevocable? • Enforcement of arbitral awards and court judgments