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Welcome to the latest edition of Law Update titled “Rise of Generative AI.”
In this edition, we dive into the dynamic world of Technology, Media, and Telecommunications (TMT) across the Middle East and North Africa (MENA) region. TMT continues to play a vital role in positioning the region as an international business and social hub, driving significant growth and innovation.
Our focus in this Law Update is on the sector’s ongoing potential to advance and propel the region toward a more digital economy. We explore the benefits of embracing a digital transformation and how local authorities have responded by enhancing regulations to accommodate the evolving TMT landscape.
This edition covers a range of topics, including – the new Telecommunications & Information Technology Law in Saudi Arabia, the intricacies of trademarks in the Metaverse, and the legal challenges faced by the video game industry. Additionally, we take a regional perspective, discussing jurisdictions such as Kuwait, Saudi Arabia, UAE, Oman, and Bahrain to provide a comprehensive understanding of the TMT landscape.
We hope you thoroughly enjoy this packed issue of Law Update, filled with captivating articles that address key legal issues within a vital sector for the region.Read the full edition
Suzanne Abdallah - Senior Associate - Litigation
Majd Baroudi - Senior Counsel - Litigation
A commercial action was filed by an individual resident (“the Claimant”) against a PSC company in Dubai (“the Defendant”).
The Claimant requested the Court to:
The Claimant expressed his willingness to assign to the Defendant all the shares that had previously been transferred by the Defendant into the Claimant’s account with another company through a finance loan concluded previously on 20
In June 2009, the Defendant submitted a reply memorandum requesting the Court to dismiss the Claimant’s case as the facts presented by the Claimant were not correct. The Defendant followed this by filing a counterclaim on 14 July 2009 wherein it requested the Court to direct the Claimant to pay the Balance plus 9% interest from the due date until full payment.
The basis of the Defendant’s counterclaim can be summarized as follows:
In 2005 the Claimant had applied for a finance loan to buy some shares valued at AED 12 million. The Defendant contended that the Claimant signed a finance facility offer, which prescribed that finance installments and profits were to be paid on a bi-annual basis. The Defendant submitted that in light of these conditions it had granted the Claimant the requested finance but that the latter failed to pay the due amount as agreed previously.
The Claimant requested renewal of the Murabaha contract for another term with the amounts due rescheduled. The Defendant accepted the Claimant’s request and on 8 May 2007 it renewed the Murabaha contract; granting the Claimant a new payment schedule. Accordingly the Claimant paid the first due installment, amounting to AED 651,775, and issued a cheque for the Balance. The Defendant contended that the Claimant failed to pay the remaining outstanding amount and had instead proceeded and initiated legal proceedings.
As part of its case, in October 2009 the Defendant submitted a settlement agreement (“the Agreement”) to the Court which had been previously executed by both parties. The Agreement contained an acknowledgement by the Claimant that he had previously concluded a Murabaha Agreement with the Defendant amounting to AED 16,558,000. The Claimant acknowledged further in this Agreement that the Murabaha Contract expired 11 months prior to execution of the Agreement, and that due to his liquidity problems, had failed to pay the Balance. The Defendant contended that because of his liquidity problems, the Claimant had requested the Defendant to re-schedule payment of the Balance through 16 cheques amounting to AED 1,000,000 each, with the first cheque to be due upon the expiration of one year from the date the Agreement was concluded.
Court of First Instance
On 18 November 2009 the Court of First Instance appointed an accountant expert specialized in Islamic Finance to investigate the matter. On 14 February 2010 the Court referred the case to the Special Judicial Committee established by Decree No. 61/2009.
The Special Judicial Committee established by Decree No. 61/2009. On 5 April 2010 the appointed expert submitted his report to the Committee. The expert concluded that the Claimant received an amount of AED 11,879,204.80 out of AED 12M facility limits under the first Murabaha made on 20.09.05 and had received the sum of AED 3,290,774 out of the facility limit granted to him under the Share Sale and Purchase Contract dated 09.02.06.
The Claimant argued the following points before the Committee:
The Claimant argued that one of the requirements of a Murabaha instrument is that the goods purchased by the bank are specified.
In dismissing the Claimant’s argument that the Murabaha Contract was a contract of adhesion the Committee outlined the three essential characteristics of such contracts:
The Committee’s determination
The Committee determined that the purchasing and trading of shares did not qualify as essential products indispensable to the Claimant, who was under no obligation to contract with the Defendant in this regard.
The Claimant’s argument that he had been deprived of the opportunity to manage his shares was also dismissed by the Committee. The Committee held that the arrangement whereby a third party appointed by the Defendant was responsible for managing the Claimant’s shares was not akin to gambling or betting and did not entail harm to the Claimant.
The third defense, which related to the alleged non-compliance with Islamic finance principles of the subject Murabaha was rejected by the Committee. The basis for the rejection was that an Islamic Bank, which concludes a Murabaha with a party, is permitted to charge a percentage on the increase in the price (i.e. the increase in the original price of the merchandise specified in the Murabaha) as compensation for the damages the Bank incurs due to a default in payment. The Committee held that this was in accordance with the Islamic principle of no harm and no reciprocated harm, “la Darar wa la Darar” and would not be considered as Usury (Rebaa) or Tawaruq (cash procurement).
Accordingly, the Committee ordered the Claimant to pay to the Defendant the Balance, plus legal fees. The Committee noted that the Claimant had not, at any stage during the proceedings, actually disputed that the Balance was owed to the Defendant.
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