US embassy cable - 04ABUDHABI3667

UNCLAS SECTION 01 OF 02 ABU DHABI 003667 
 
SIPDIS 
 
STATE FOR NEA/ARP 
AMCONSUL DUBAI FOR MCARVER 
PASS TO USTR 
PASS TO COMMERCE/ITA 
JUSTICE FOR EGILPEN 
 
E.O. 12958: DECL: N/A 
TAGS: TC, ECON, ETRO 
SUBJECT: COMMERCIAL LAW DEVELOPMENT PROGRAM LAYS GROUNDWORK 
FOR PARTNERSHIP WITH UAE ON COMMERCIAL LEGAL REFORM 
 
 
1.  (U) Summary:  Staff from the Department of Commerce's 
Commercial Law Development Program (CLDP) visited the UAE in 
September to gather information and establish the groundwork 
for future cooperation with the UAEG on issues of commercial 
legal reform.  Econoff and the CLDP team met with a number 
of UAE officials and attorneys in Abu Dhabi and Dubai and 
had productive brainstorming sessions.  The team conveyed 
CLDP's goal of working with partner countries to improve the 
legal, regulatory, and commercial environment, with the 
long-term objective of preparing each country for MEFTA. 
UAE officials were enthusiastic about the program and 
identified potential areas of cooperation cluding offering 
training to judges and arbitration center staffs in an 
effort to increase their knowledge of commercial topics. 
End summary. 
 
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MEPI and TIFA process provides framework for cooperation 
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2.  (U) CLDP will be working in the region under the 
auspices of the U.S. Middle East Partnership Initiative 
(MEPI) and will focus on providing technical assistance to 
improve the legal, judicial, and regulatory environments. 
The program will also target bilateral needs in areas such 
as judicial reform and information technology with the near- 
term objective of assisting the UAEG prepare for possible 
FTA negotiations with the United States.  Accordingly, their 
first meeting was with Khalid Al Bustani at the Ministry of 
Finance and Industry, who serves as the senior working-level 
coordinator for the Trade Investment Framework Agreement 
(TIFA) process.  Al Bustani expressed his support of the 
CLDP program and noted particular interest in regional 
programs over bilateral ones.  Recognizing that the UAE may 
be entering into FTA negotiations with the U.S. in the near 
future, he felt that regional programs were more appropriate 
at this time. 
 
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Agency Law: Informed Debate Would Assist Reform Efforts 
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3.  (U) UAE officials recognize that the existing agency law 
is one of the key areas of concern for the U.S. in moving 
toward an FTA. In a meeting with officials from the Ministry 
of Economy and Commerce, Abdulla Ahmed Al Saleh noted that 
the ministry believes an open and free market benefits the 
nation's economy, but he acknowledged that vocal lobbies are 
working to protect their interests.  He opined that his 
government needs to convince consumers that changing the 
agency law is in their best interest, thus energizing them 
to participate in an informed debate with those advocating 
the status quo.  He added that without such a debate, it 
would be difficult to pass the necessary reform. 
 
4.  (U) In a discussion of this issue with officials from 
the Abu Dhabi Chamber of Commerce, an official with the 
Chamber's Arbitration Center stated that the legal structure 
is sufficient to encourage investment, but in many cases, 
U.S. companies do not understand the structure and therefore 
do not invest. 
 
5.  (U) Comment:  Although it is true that many small and 
medium sized businesses may not understand the procedures 
for conducting business in the UAE, there are valid concerns 
regarding the current laws that inhibit many businesses from 
investing.  One of these obstacles is the 51-49 local 
majority ownership issue and the de-facto permanency of a 
relationship between a U.S. company and its UAE agent.  If a 
US company signs an agreement with a UAE company and 
registers the relationship, the UAE company can continue 
renewing the relationship with the UAEG, even after the term 
of the contract has expired and without approval from the 
U.S. company.  Thus, in order for the U.S. company to 
continue to do business in the UAE, the company must 
continue to work through the original agent, even if the 
agent is not performing satisfactorily.  End comment. 
 
 
 
 
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Ascension to the New York Convention Will Aid Arbitration 
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6.  (U) An area CLDP identified as a prospective area of 
cooperation is in the realm of arbitration and adjudication. 
CLDP met with representatives of the Abu Dhabi Chamber of 
Commerce and an independent arbitration center in Dubai to 
discuss the potential for resolution of disputes through 
alternative dispute resolution (ADR).    Comment: Although 
the practice of ADR is growing, arbitration as a means of 
voluntarily resolving disputes has not garnered widespread 
acceptance in the UAE.  By law, companies may choose to 
handle disputes in international arbitration centers, but 
UAE courts are not obligated to enforce foreign arbitration 
awards.  End comment. 
 
7.  (U) The legal advisor in the Ministry of Economy and 
Commerce informed Econoff and the CLDP team that the 
Ministry has drafted a new arbitration law.  The draft law 
is currently being reviewed by the Ministry of Justice and 
will be forwarded to the National Council for approval. 
Although he would not explain specifics of the law, he noted 
that this law addresses the provisions of the New York 
Convention regarding arbitration enforcement.  Comment: 
Presently, the UAE is not a signatory to the New York 
Convention.  End comment. 
 
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Need for Judicial Training 
-------------------------- 
 
8.  (U) In a candid and energized discussion with four local 
attorneys, it was apparent that one of the most needed areas 
of reform is that of commercial judicial training. 
According to the attorneys, there is no separate court 
structure for commercial cases, and many of the judges have 
no training or expertise in UAE commercial law.  This 
results in procedural confusion and rulings that are at 
times in opposition to the law.  The attorneys felt the 
problem was two-fold: the lack of a specific commercial 
judicial sector mmercial disputes involving foreign 
parties tend to come before the civil courts in the federal 
system d a lack of judicial expertise.  Regarding the 
latter, the attorneys noted that many judges come to UAE 
from Egypt to serve as a judge for three or four years, and 
have no specific training in UAE law.  They also explained 
that one can become a judge in the UAE without ever having 
practiced law as an attorney.  The system allows students in 
law school to elect to become judges, and thus there are 
many young judges on the bench with no experience and very 
little legal training.  The attorneys were enthusiastic 
about CLDP assistance in this regard, and they suggested 
university exchanges and offering commercial training to 
judges, with the possible long-term goal of developing a 
separate commercial judicial sector. 
 
9.  (U) CLDP had meetings in Dubai at the Judicial Training 
Institute and the Dubai International Arbitration Center, 
reported septel. 
 
Sison