Russia and the Gulf countries continue to deepen economic cooperation, which becomes especially important against the backdrop of sanctions restrictions. The Russian-Gulf Business Forum: New Ties, New Opportunities (took place in Moscow on 24 September 2024) provided an opportunity for a comprehensive discussion of both business prospects and legal issues related to the activities of Russian companies in the region.
Speakers discussed key aspects of entering the Middle East markets, including investment opportunities, infrastructure development and localization of production. The legal systems of the region's countries and mechanisms for resolving commercial disputes were discussed. The forum showed that the Gulf countries offer Russian businesses ample opportunities for successful growth and long-term cooperation.
In the first session, participants discussed business opportunities in Gulf countries such as Oman, Bahrain and Saudi Arabia. Speakers highlighted the advantages of these jurisdictions, including tax incentives, simplified company registration procedures and support for foreign investors. Special attention was paid to investment, localization of production and development of effective strategies for financial transactions.
Stepan Guzey, Partner at Lidings, opened the forum with an introductory speech, reminding that Russia has a long history of interaction with the Arab world, especially with the UAE. However, in his opinion, today it is time for Russian companies to pay attention to other promising jurisdictions in the Arab region, such as Oman and Bahrain. He noted, "It is not only the Arab Emirates that exist on the Arabian Peninsula. There are other jurisdictions that allow for a deeper understanding of the economic and cultural characteristics, as well as provide and will provide more interesting effective conditions for cooperation and interaction with Russian and foreign investors."
Despite the high interest of the Russian side in cooperation, there are many unresolved issues and lack of information, making this event a key to new business opportunities. Guzey expressed gratitude to the diplomatic missions supporting economic interaction between the countries and emphasized the importance of the current forum as a platform for establishing new business ties.
Daniyal Khalid, representing ALC Lawyers and Counsels from Oman, spoke about the significant opportunities for foreign investors in the sultanate. Oman has updated its commercial law to allow foreign companies to own 100% of the capital in almost all sectors. Three of the country's five free economic zones are active and attracting foreign investors. They require a lower degree of Omanization, interaction with government agencies is easier, and there is an opportunity to obtain tax exemption for 10 years. Russian clients usually prefer the Dukm zone.
The business registration process takes 30-40 days and requires a physical office. To register a company, a founder - an Omani citizen - is required, through whom all licensing procedures are carried out. Oman also has a double taxation agreement with Russia, which helps Russian companies minimize tax expenses and strengthen their position in the Omani market.
Steeve Zouein, Senior Associate and Head of KSA Transactions at Lidings Global (Saudi Arabia), spoke about the legal framework and opportunities for doing business in Saudi Arabia. He noted that the country is actively attracting international companies through a localization program and the development of regional headquarters. For companies with branches in several countries, Saudi Arabia provides significant tax benefits, including tax exemption for 10 years, simplified visa processes and zero percent income tax. Having a regional office provides an opportunity to participate in government tenders.
Mr. Zouein emphasized that Saudi Arabia is actively developing legislation to improve the working conditions for foreign investors. Many companies that open small offices at the beginning of their operations eventually expand their presence in the country due to the favorable business environment. Saudi Arabia's Ministry of Investment supports foreign companies at all stages of their operations, including assistance with business structuring and capital transfer. For individuals, opening companies is limited; foreign nationals can only do business through corporations.
The moderator of the first session, Andrey Zelenin, Managing Partner of Lidings, drew attention to the key difference between business opportunities in Oman and Saudi Arabia. He emphasized: "In Oman, we can go in as an individual participant, while for Saudi Arabia, as a general rule, it has to be a corporation."
Rami Jamal, Senior Partner at Helvetican (Bahrain), presented Bahrain as a key business hub in the region, attracting international companies due to its high economic freedoms and favorable regulatory policies. He noted that Bahrain is home to large multinational companies such as Amazon, which have chosen the country to host their regional headquarters. Bahrain was also one of the first states to issue cryptocurrency licenses, which attracts many blockchain companies to the country.
Mr. Jamal emphasized that the process of company registration in Bahrain is as simple as possible - opening a business and a bank account can be done in a few working days. Most industries are exempt from taxation, and there are no restrictions on hiring labor for foreigners. In addition, Bahrain's state labor fund supports registered companies, which makes the country particularly attractive to international investors.
Anzhelika Taranova, partner and head of the corporate services at UPPERCASE Legal Advisory (UAE), noted that it is increasingly difficult for Russian companies to conduct international transactions, including with UAE banks. Using payment agents to close this issue is not the best solution, as it entails additional commissions and difficulties in financial management.
Ms. Taranova suggested a more profitable strategy - to set up a company with a bank account, which would close the need for regular and continuous own payments with full control on a long-term basis. As countries where such transactions are still possible, she singled out Kazakhstan, Serbia, Kyrgyzstan and Mauritius, which offer stable conditions for conducting financial transactions without the need to establish a representative office. The speaker paid special attention to Mauritius, noting that it is important to keep an eye on developments and consider different options, including such exotic countries.
Nuriya Musina, Managing Partner of Econix Research (UAE), spoke about the prospects of Russian business in the pharmaceutical market of the Gulf countries. She noted that the countries of the region are actively seeking to localize production after the COVID-19 pandemic, which opens up new opportunities for Russian companies. To successfully enter this market, it is not enough to register a product - companies must pass complex regulatory procedures and prove the clinical and economic efficiency of their solutions.
Ms. Musina emphasized that it is important to offer solutions that meet the real needs of local healthcare systems. Success in this market depends on close cooperation with government agencies and the expert community. Gulf countries are interested in joint clinical trials with Russian companies, which opens up new opportunities for interaction and partnership.
The second session discussed various mechanisms for resolving commercial disputes in the Gulf. Speakers described the role of arbitration procedures in Bahrain, Oman and other countries in the region, where investors are provided with flexible conditions for disputes, including the choice of applicable law and language of proceedings. Special attention was paid to reforms of legal systems aimed at attracting foreign companies, as well as the development of new international arbitration mechanisms.
Aseel Zimmo, Managing Partner of The First Link (Bahrain), spoke about the dispute resolution system in Bahrain, noting that the country is striving to become an important center for arbitration in the region and is building the most investor-friendly legal environment possible. In Bahrain, commercial disputes are dealt with, among other things, through arbitration procedures that were introduced more than 30 years ago. In recent years, a reform has been introduced to allow proceedings to be conducted in English, making it much easier for foreign investors to participate in the process.
Ms. Zimmo emphasized that the new Bahrain International Commercial Court (BICC) is rapidly gaining popularity due to its flexibility and speed of execution. Bahraini court decisions can be enforced both domestically and internationally. Bahrain competes with globally recognized arbitration centers like London and Singapore by offering more accessible and cost-effective terms. Mediation is being actively developed, which is often the preferred method of resolving commercial disputes and allows the parties to negotiate at lower costs.
Zeinab Al Lawati, Senior Associate in the Dispute Resolution practice at ALC Lawyers and Counsels (Oman), highlighted Oman's legal system and the specifics of dispute resolution in the country. From 2019, foreign investors can own 100% of a business without the need for local partners. This expands opportunities for foreign companies, but requires special attention to local laws and enforcement practices.
Ms. Al Lawati stressed that commercial disputes involving foreign companies are handled with the participation of specialized departments. The parties are free to choose the applicable law and the language of proceedings, which attracts more investors every year: they are confident that their investments are protected and that court decisions will be enforced. Omani law has a simplified procedure for commercial disputes, which facilitates quick resolution of conflicts, and the country guarantees the enforcement of international court decisions.
Alexander Molotnikov, Executive Director of the REC Law and Business of Moscow State University, spoke about the importance of taking into account local peculiarities when entering new markets, particularly the Middle East. Russian and Soviet legal traditions have virtually no influence in this region, and lawyers working here should not transfer their approaches to a foreign legal culture. The Middle East has a unique school of law that draws on local traditions but has a strong Western influence. For example, English law has had an impact: some English lawyers have acted as arbitrators or participated in law-making here.
Mr. Molotnikov emphasized that it is important for Russian lawyers not only to have professional knowledge, but also to take into account the cultural and legal peculiarities of the Gulf countries - to adapt to local realities, rather than transfer domestic legal approaches.
Mikhail Savranskiy, Professor of the International Private Law Department of the Private Law Research Centre named after S.S. Alexeev (PLRC), Deputy Chairman of the Arbitration Centre at the
Russian Union of Industrialists and Entrepreneurs (RUIE), spoke about the work of the Arbitration Center at the RUIE, which was the first in Russia to obtain an arbitration license. The Center has specialized arbitrators, and arbitration awards issued by the Center are recognized in leading jurisdictions. Arbitration proceedings can be conducted in any language, providing convenience for international participants.
Mr. Savranskiy also shared that Russia presented a draft BRICSAM arbitration mechanism. It does not envisage the creation of a single arbitration center, but proposes a single rule for dispute resolution based on the UNICITRAL arbitration rules with adaptations. Emphasis is placed on the independence and impartiality of arbitrators and the development of a single schedule of fees. There are recommended arbitration clauses that allow either reference to the BRICSAM rules or the choice of arbitral institution depending on which party initiates the dispute. This mechanism will allow businesses from different countries to enter into reliable arbitration agreements and ensure fair resolution of disputes.
In conclusion, session moderator Stepan Guzey noted that in the Gulf countries most disputes are resolved before going to court: "Statistically, six disputes out of ten are highly likely to be resolved the moment a lawyer admitted to practice in a particular residence prepares a well-founded and documented claim". However, if the case does go to trial, it will be a tough trial: "The four cases out of ten that go to trial are accompanied by tough arguments and a serious fight in court. This is an important feature of the national character that should be taken into account".