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The United Arab Emirates

An interview with Rania Tadros , Pavlo Samothrakis and Mohamed El Hawawy


Rania Tadros is the managing partner of Ince & Co’s Dubai office. Rania qualified as an English solicitor with Ince & Co in London in 2000 and relocated from London to Dubai in 2013 with her family. Rania has over 19 years’ experience in international commercial arbitration and maritime litigation. She is currently advising in numerous disputes varying from simple charter disputes to complex multiparty cross-jurisdictional disputes.

Rania has advised on a number of shipping disputes concerning the Middle East, which have included casualty investigations. She has particular experience dealing with groundings in the Suez Canal and the UAE, and was part of the team that handled the Tropic Brilliance grounding as well as the Ever Smart collision in Jebel Ali in 2015.

Her practice focuses on shipping and offshore energy disputes as well commercial support to companies in the shipping and offshore sectors. She regularly advises her clients on matters arising from utilisation of vessels and offshore structures, limiting and excluding liability, contractual disputes and providing general legal support to companies operating in the offshore arena.

Pavlo Samothrakis is a partner at Ince & Co Dubai and qualified as a solicitor with Ince & Co in 2008. Pavlo specialises in shipping, international trade and energy, and offshore sectors, dealing with a range of matters including charter party and bill of lading disputes, and casualty work. He advises on matters, including drafting of charter parties.

Mohamed El Hawawy is a partner at Ince & Co Dubai. He joined the firm in 2013, and specialises in litigation and dispute resolution. Mohamed advises on contentious and transactional shipping matters, including ship arrest and salvage. He also advises clients in the insurance and aviation sector on reinsurance disputes and air carriage disputes.

GTDT: What is the current state of the shipping industry in your country?

Rania Tadros, Pavlo Samothrakis and Mohamed El Hawawy: The plunge in oil prices and the general slowdown in the container market has had a significant impact on the shipping industry in recent years. While the shipping industry in the country has been affected by this in much the same way as other maritime centres, the UAE’s strength lies in its strategic position as a logistics centre in the Middle East and its leading port companies continue see year-on-year growth.

The UAE comprises of seven emirates – Dubai remains the major maritime centre, but other emirates also make their own important contribution to the shipping industry. The UAE benefits from its vital geographic location connecting the Red Sea, East Africa and the Indian subcontinent.

Dubai is the third-largest centre for port operators in the world. The Jebel Ali port operated by DP World is the largest port in the Middle East and world’s ninth-largest container port. It is reported that more than 5,500 companies work in the maritime sector in Dubai, supporting the economy with 76,000 jobs. In 2017, Dubai’s GDP increased by 2.8 per cent compared to the year before and the transportation and storage sector are reported as the biggest contributors to the GDP at 18.5 per cent. Transport and logistics sectors are key to the UAE’s economic growth.

Abu Dhabi ports have also shown continuous growth as the UAE’s maritime trade hub covering general and bulk cargo, container and increasing roll-on and roll-off traffic. There is an influx of investment into the new container terminal at Khalifa Port. Fujairah is another maritime hub in the UAE and its infrastructure will be subject to further development by Abu Dhabi Ports including deepening of berths and expanded storage facilities, which reportedly involves investment of 500 million dirhams.

The UAE hosts a number of large shipowners including branches of international owners. The offshore industry in the UAE is weathering the storm relatively better than in some other parts of the world, with vessel utilisation rates in the region being higher than the global average. The UAE remains an important base for a number of offshore shipowners.

The UAE government has maintained its efforts and goals to create conditions for the growth of the industry and increasing importance of the UAE as a major maritime centre.

GTDT: What are the prevailing shipping market trends affecting your country?

RT, PS & MH: The country’s unique position in the market can be attributed primarily to the UAE’s geopolitical position and the vision of the UAE government. The government has recognised the need for diversification in light of global economic crises and, more recently, the declining oil price and the strategic vision of the country is to build on the strength of the country by focusing on technology, innovation and continuous growth of Dubai as a logistics centre.

The country is preparing to EXPO 2020, which drives substantial investments in the transport and logistics sectors. The UAE is also set to benefit from China’s ‘One Belt One Road’ initiative.

“It is hoped that the introduction of the new Arbitration Law, together with the recent set up of the specialised maritime arbitration centre in the Emirates Maritime Arbitration Centre, will attract more parties willing to resolve their maritime disputes in the UAE.”

GTDT: Are there any recent domestic or international political or legislative developments that may have an impact on your country’s shipping market?

RT, PS & MH: After almost a decade in the making, the UAE has introduced the new Arbitration Law in May 2018. The new law replaces articles 203–218 of the UAE Civil Procedures Code, which have previously governed domestic arbitration proceedings. While the new law did not bring about a dramatic change, it did improve on certain provisions adding certainty and clarity to the UAE onshore arbitration process. The most significant changes are the improvements to the process for enforcement and challenge of domestic arbitral awards. It is worth nothing that the UAE has two free zones (Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market), which have their own arbitration regulations and they remain unaffected by the new Arbitration Law, which will only apply to onshore proceedings. It is hoped that the introduction of the new Arbitration Law, together with the recent set up of the specialised maritime arbitration centre in the UAE (Emirates Maritime Arbitration Centre), will attract more parties willing to resolve their maritime disputes in the UAE.

The UAE remains in need of a new maritime law, with the current Maritime Code dating back to 1981 and lacking in a number of areas to properly cater for the country’s growing importance as an international shipping centre. The government has started working on a new draft law. Input is being provided by civil law and common law lawyers to identify best practices and solutions. There is no set date for when the law will be introduced but the maritime community is watching this space with great interest. It is hoped that the new law will address a number of issues including making changes that would transform the UAE into an attractive flag state.

A further development is the introduction of value added tax (VAT) in the UAE in January 2018. The standard VAT rate is set at 5 per cent. The international transportation industry is one of the few industries subject to zero rate VAT. However, the full implications on the shipping industry remain to be seen. Notwithstanding this development, the UAE remains an attractive place for the shipping industry because of its largely tax-free policies.

GTDT: What are the key regulatory and compliance issues for your country’s shipping market?

RT, PS & MH: The sanctions against Iran remain a relevant issue in the UAE, as has been the case for a number of years. Despite the suspension of the US and the EU sanctions regimes in January 2016, the majority of UAE banks remain reluctant to do any business involving Iran for the fear of repercussions from their American banking partners, which made it difficult for businesses to pursue their legitimate trade with Iran. The reimposition of sanctions by the United States announced in May 2018 will now impact the trade between Iran and the UAE. The sanctions landscape is set to be difficult to navigate in the year ahead, as at the time of writing the European Union remains committed to the suspension of sanctions and is suggesting that it will introduce blocking regulations to counteract the effect of the US sanctions.

The UAE introduced an embargo against Qatar in June 2017 and it remains in place at the time of writing. The embargo affects the ability of Qatari vessels to call in the UAE (and embargoing states) ports and restricts transportation of cargo originating in the Qatar between Qatar and embargoing states.

In May 2018, the UAE government announced the decision to allow 100 per cent foreign ownership of local companies in certain sectors the UAE. Until now, the UAE law requires 51 per cent local ownership for onshore companies. Although full foreign ownership has been permitted in the numerous free zones across the country, the trading activity of such free zone companies is subject to significant restrictions. Therefore, this change, once implemented, will represent an important step towards encouraging foreign investments in the UAE market, including the shipping industry.

The UAE is also preparing to ratify the Maritime Labour Convention and as part of that process the Federal Transport Authority has introduced the mandatory insurance requirement. The FTA’s Circular No. 1 of 2018, which entered into force on 20 February 2018, requires all UAE flagships and all foreign flagships operating in the UAE water of 200 gross tonnage and more to have insurance in place with identified insurance providers to cover certain financial liabilities to seafarers.

GTDT: What are the shipping industry’s current sources of finance? How do you predict they will develop, and what are the advantages and challenges to financing a vessel in your country?

RT, PS & MH: Traditional ship financing in the UAE has been fairly quiet in the past year. There is some availability of local capital, which sets it apart from many other jurisdictions, but with that the activity remains limited. The international banks remain cautious and have not established dedicated shipping desks in the UAE. This has presented an opportunity for local UAE banks to build stronger relationships with local shipowners.

Difficulties remain for owners and operators to get consistent financial support. The lending requirements and cost of funding from traditional finance sources continue to increase. There are indications that the government is considering the challenges faced by the local market and is working on the solutions to address them. With that, Islamic finance has proven itself to be a competitive method of funding for the shipping industry in the UAE.

GTDT: Have there been any recent significant domestic or foreign court decisions or arbitration awards that impact on your country’s shipping market?

RT, PS & MH: Ince & Co has recently acted for the successful claimants in an important case before the Dubai World Tribunal (DWT), which is the first reported case in the UAE that acknowledges a party’s ability to start pre-emptive limitation proceedings and establish a limitation fund under the Convention on Limitation of Liability for Maritime Claims 1976 (the Convention). The DWT is the tribunal established by Decree 57 of 2009 to deal with proceedings relating to Dubai World and its subsidiaries. It remains to be seen how the DWT’s decision will affect the onshore courts but the judgment allows owners to seek to limit their liability in accordance with the Convention and rely on the lower limits in the UAE as opposed to those jurisdictions that have ratified the amendments to the Convention and therefore have higher limits.

Another development is that the approach of the UAE courts to enforcement of foreign arbitral awards pursuant to the 1958 New York Convention is improving. However, enforcing a foreign judgment in absence of a treaty remains a challenge. It was thought that the DIFC courts can provide an alternative avenue for enforcement of foreign arbitral awards and judgments in the UAE. However, recent decisions of the Joint Judicial Committee established by Decree 19 of 2016 demonstrated that this route to onshore enforcement of foreign arbitral awards and judgments is fraught with difficulties and in many cases can be frustrated by the defendants’ starting parallel proceedings in local courts.

GTDT: What is the outlook for your country’s shipping market?

RT, PS & MH: The outlook for the UAE shipping market is relatively positive. There is little doubt that the UAE, as a maritime centre, has a lot of potential.

In a recent survey conducted by Menon Business Economics Group and DNV-GL, Dubai was ranked as the 10th shipping centre out of 15 for 2017, and over 10 per cent of experts ranked it as number one of top five cities. It was also ranked in sixth place for port and logistics services highlighting its growing importance as a logistics hub for both shipping and aviation industries. Most interestingly, it was also placed in the top five for attractiveness and competitiveness, and only second in the experts’ assessments of the policy framework of their own city (based on overall assessment of taxes, subsidies and regulations) and the government support of the maritime sector as perceived by the experts. All these factors point to Dubai’s potential ability to climb up the rating of the major shipping hubs in the years to come.

The government is implementing a number of initiatives to ensure that Dubai’s potential comes to fruition.

Dubai government has recently launched the Dubai Industrial Strategy 2030, which identifies the maritime sector as one of the six priority sectors. The strategy forecasts that Dubai’s total GDP will increase by 160 billion dirhams. In the maritime sector, the strategy aims to capitalise on the status of DP World as one of the largest port operators in the world.

Dubai is also implementing the Maritime Sector Strategy to develop, regulate and promote Dubai’s maritime sector with a vision to create a leading global maritime centre. The Dubai Maritime City Authority is implementing the strategy and is leading the initiatives in the maritime sector.

The Inside Track

What are the particular skills that clients are looking for in an effective shipping lawyer?

RT: Clients in the maritime world rightly expect their lawyer to have a thorough understanding of their business as well as the legal framework in which it operates. Shipping is an international business and so a lawyer who has international exposure is essential. Like clients in many sectors, shipping lawyers also need to be responsive to their clients and be able to give definitive and clear answers in a timely fashion.

What are the key considerations for clients and their lawyers when arranging finance for a shipping transaction?

RT: In our opinion the key consideration are:

  • Availability: this may sound obvious, but there are differences geographically and between the sectors as to what type of lender will be willing to lend at a particular time in a particular market.
  • Price: most owners will accept more restrictive covenants and provide greater security if the price is right. This does not mean the margin alone but duration of the loan balanced with the repayment schedule.
  • Flexibility: where underlying employment contracts are highly sought after, it is vital that owners enjoy a degree of freedom to enter into a variety of contracts, change flags or trade in some more difficult areas.
  • Trust: finally, and most importantly, there is the personal element. Most finance documentation will be relatively lender-friendly, meaning that any obliger, not just the primary debtor but any security provider, can rely on the lender to work with them, not against them when matters are difficult.

What are the most interesting and challenging cases you have dealt with in the past year?

RT: It is difficult to choose, and interesting cases are often the most challenging too. I have had a number of cases pursuing debts for clients under the new Bankruptcy Law and those have presented a number of legal as well as practical challenges that we have had to overcome to get our clients paid. In my opinion the most interesting cases handled by our office last year relate to the right to limit liability. The question has come before both the Dubai World Tribunal as well as the local courts and it has been very interesting for all those involved to consider how international conventions operate within the UAE legal framework.

Rania Tadros, Pavlo Samothrakis and Mohamed El Hawawy
Ince & Co

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