Structuring Renewable Energy Projects in Uzbekistan
PPPs and dual structures for projects financing in Uzbekistan
LMA publishes first of its kind model form of credit risk insurance policy
Overview of the new model form of credit risk insurance policy
Arbitration in Saudi Arabia
Why it's on the rise/key developments in recent years
Lorem Ipsum Dolor
Consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore.
Welcome.
We have been working in emerging markets for decades across multiple practices and regions, helping our clients to navigate the unique challenges and opportunities associated with doing business in different markets. Our work spans a wide range of jurisdictions, parties and products – one of the main reasons we enjoy the work so much. In previous editions, we focused on general themes across multiple markets and products. In this, our third edition, we delve a little deeper to discuss some hot topics that we have been advising our clients on recently in certain specific jurisdictions. For example, why the use of arbitration is on the rise in Saudi Arabia, the possible ways of structuring renewable energy projects in Uzbekistan and the latest developments in crowdfunding in Romania. This edition features articles written by, or together with, Al Akeel & Partners (our cooperation firm in Saudi Arabia), Wolf Theiss in Romania and Kinstellar in Uzbekistan. We regularly work with these firms and we thank them all for their valuable contributions. Please reach out to any of us if you have any questions about any of the articles.
Eye on Emerging Markets
Q3 2022 Edition Three
Additional Insights
We have created a dedicated portal which showcases key spotlight issues providing coordinated global business and legal thought leadership, legal updates, videos, podcasts, and webcasts.
Our Eye on ESG blog provides insights and analysis to help navigate the ESG landscape on a global scale. We cover a range of timely ESG updates and issues, including regulatory, policy, political and industry-related developments, as well as judicial developments and case law.
Get in touch
For more information on Emerging Markets, or any of the topics in this newsletter, please contact one of our key contacts above or vist our website.
To replace an image, select the png or jpeg on the canvas or in the layers panel and click the "Replace image" button, which is next to the image thumbnail in the design panel. Any applied animation to the original image will carry over to the new one.
To make a video auto play in the background. Select the video in the layers panel or on the canvas. Next to the video thumbnail in the Design panel, select the setting gear icon to view the video settings.
Template - Landing Page Template
1280px x 5000px
The grid background is pinned which means it is fixed to a specific point in the viewport. Pinning an object allows you to keep the objects always visible on the canvas, regardless of where the user scrolls on the canvas. Note: Pinned objects do not currently work on full-height embedded experiences; only standalone experience and scrolling embedded experiences. To unpin select the group, next to the X,Y coordinates click the pin icon.
Hover interactions allow you to reveal or hide folders, objects, or groups when the user hovers their mouse over your specified trigger. To add a hover interaction, draw a hotspot over the area you want the user to hover. Select the hotspot and navigate to the Interaction tab in the Inspector Panel. Select “hover” as your trigger and specify the action, which can be: show, hide, show and stay visible, or hide and stay hidden. Finally, choose the folder, object, or group you want to reveal or hide.
Crowdfunding in Romania
What is the legal framework around crowdfunding in Romania?
Contractual risks
Ukraine Crisis – the contractual risks of withdrawing from Russia
Key Emerging Markets Team
Latest topics
Blog: Eye on ESG
Ash McDermott | Banking & Finance
Ed Parker | Capital Markets
Chris Arnold | Banking & Finance
Douglas Doetsch | Banking & Finance
Gonçalo Falcão | Corporate
Ian Coles | Africa & Mining
Jason Hungerford | Regulatory
Kirsti Massie | Projects & Infrastructure
Luiz Aboim | Litigation
Meredith Campanale | Projects & Infrastructure
Musonda Kapotwe | Banking & Finance
Hallam Chow | Structured Finance
Peter Pears | Banking & Finance
Rachel Speight | Banking & Finance
Robert Hamill | Corporate
Sam Eastwood | Litigation
Read full article
Visit Mayer Brown
Select one our experienced lawyers for more information
Scroll down
Read ESG Blog
Visit portal
Download PDF
Jim Patti | Banking & Finance
David Fraher | Banking & Finance
Barry Cosgrave | Restructuring
Kwadwo Sarkodie | Construction & Engineering
UAE recognises reciprocal enforcement of English court judgments
Significant step for the recognition of English court judgments
Eye on Emerging Markets | Q3 2022
Arbitration in the Kingdom of Saudi Arabia (the "KSA") has changed significantly in recent years and is on the rise. In this Legal Update we summarise the key developments that have precipitated this change, including a new arbitration law, a new enforcement law, increased support from the KSA's judiciary; and the work of a dynamic and modern arbitration institution - the Saudi Center for Commercial Arbitration (the "SCCA").
Depending on the characteristics of the loan in question, a margin "penalty" may also be assigned for falling below a predetermined minimum SPT, whereby any previously achieved incentive is lost.
These developments mean that the KSA is increasingly being recognised as an arbitration-friendly jurisdiction. The increased use of arbitration also goes hand in hand with the goals of Saudi Vision 2030, a strategic framework aimed at reducing the KSA's dependence on oil, diversifying its economy and developing public service sectors like infrastructure, health and tourism. The increasing popularity of arbitration in the KSA Under the former arbitration regime governed by a 1983 statute (the "Old Law"), ad hoc arbitration was most prevalent in the KSA and the courts had mandatory oversight of, and heavy involvement in, the arbitral process. Due to discontentment with the Old Law amongst the Saudi population, as well as a general aversion and scepticism within the region, arbitration was rarely the 'forum of choice' for dispute resolution. However, over the last decade, with the introduction of an improved legal framework for arbitration and a new, modern arbitration institution (the SCCA), there has been a shift towards institutional arbitration and increasing confidence to select arbitration over other methods of dispute resolution. Below, we explore four instrumental reasons for this trend. 1. The KSA's New Arbitration Law On 9 July 2012, a new arbitration law (Royal Decree No. M/34 on 24/5/1433H) (the "New Arbitration Law") came into effect which aimed to correct certain deficiencies in the Old Law. Based broadly on the UNCITRAL Model Law, but adapted to deal with Sharia law, the New Arbitration Law brings the KSA's arbitral framework in line with best practices in international commercial arbitration. It applies to KSA-seated and foreign-seated arbitrations where the parties have agreed that the arbitration shall be subject to its provisions. The Executive Regulations implementing the New Arbitration Law came into force in June 2017 and provided certain practical clarifications in relation to certain provisions of the New Arbitration Law. Whilst retaining the court's supervisory role over the arbitral process, the New Arbitration Law significantly reduces the level of judicial intervention in arbitration and provides more control to tribunals and parties to conduct cost-effective and efficient proceedings. Key features of the New Arbitration Law, which are likely to account for the increased popularity of arbitration in the KSA, include: • A new power for a tribunal to adjudicate disputes under its jurisdiction, including disputes over the validity of the arbitration agreement (a domain previously reserved for the judiciary). • Parties now have wide discretion to choose the substantive law, procedure/institutional rules, venue, their arbitrators, the arbitration language (Arabic no longer mandatory), whether the tribunal can order temporary measures etc. However, the application of the selected rules and applicable law must not contravene Sharia law or public policy. • An express recognition of the separability of the arbitration clause (protecting arbitration agreements from defects affecting the underlying agreement). • Parties may select any legal representative, whether local or foreign, and there are no gender, nationality or religious constraints in terms of appointment of arbitrators, mediators, lawyers, experts and other representatives (only a requirement that a sole arbitrator or chairperson must have a degree in law or Sharia). • The Saudi judiciary now only reviews decisions in relation to jurisdiction and procedural issues, having eliminated a review on the merits (available under the Old Law). • If a KSA court finds that the arbitral award conflicts with Sharia law as applied in the KSA, then an execution order may be issued in respect of that part of the award that is compliant with Sharia law. The law disallows any appeal against the issuance of an execution order. If an execution order is not issued upon application to the court, then the court’s decision not to issue it may be appealed. The New Arbitration Law represents a major step forward in modernizing the arbitration process in the KSA and goes further than addressing purely domestic issues as it provides for recognition of foreign arbitral awards without those awards being required to go through a process of re-hearing or re-arbitration under KSA rules before they can be enforced in the country. 2. The KSA's New Enforcement Law To complement the New Arbitration Law, a revised enforcement law came into effect in March 2013 (Royal Decree No. M/53) ("New Enforcement Law") seeking to address prior concerns about the inconsistent enforcement of awards. Prior to the New Enforcement Law, the Saudi Board of Grievances first had to review awards for compliance with Sharia law, a step which was lengthy and rigid and often resulted in refusals to enforce awards. Under the New Enforcement Law, arbitration awards can be enforced more quickly and effectively before an Enforcement Judge. However, a State court can still refuse to enforce an award (or part of it) if its reasoning violates Sharia law (for example: interest or usury is forbidden under Sharia law).
Written by Raid Abu-Manneh, Alain Farhad, Gerard Moore, Ali Auda, Lisa Dubot
The KSA has also signed the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the "New York Convention") obliging it to recognise and enforce awards made in other Contracting States. Under the New Enforcement Law, the conditions for enforcing foreign arbitral awards in the KSA are more demanding than those prescribed under the New York Convention. The Enforcement Judge must be satisfied that: • the KSA courts do not have jurisdiction with regards to the dispute; • the award was rendered following proceedings in compliance with the requirements of due process; • the award is final (as per the law of the arbitral seat); • the award does not conflict with any other judgment or order issued on the same subject by a judicial authority of competent jurisdiction in the KSA; and • the award does not contradict Saudi public policy. The New Enforcement Law appears to have been well-received in the KSA in light of the sharp increase in enforcement applications since its implementation (approximately 35,000 enforcement applications with an aggregate value of just over US$6.16 billion). 3. Strong judicial support for arbitration Another positive development has been the shift in judicial attitude towards arbitration. Traditionally, the judiciary's track record for enforcing foreign awards was erratic, hence parties were reluctant to submit to foreign arbitration. Following a judicial reshuffle and the introduction of the new laws discussed above, this state of affairs has changed dramatically; the KSA judiciary now consistently enforce both national and foreign arbitral awards. In 2021 alone, its judiciary enforced 204 domestic and foreign awards and enforcement proceedings were, on average, resolved within two weeks. The Saudi judiciary is also supporting the growth of arbitration in the KSA in other meaningful ways, including: • By recognising arbitration agreements and respecting the parties' choice of arbitration to resolve their disputes. • By competently and consistently adjudicating arbitration-related matters. • By ranking highly when it comes to judicial independence and efficiency. • By approving the appointment of female arbitrators (the first female appointee, Ms. Shaima Aljubran, took place in May 2016), demonstrating that there is no clear basis in Saudi law that prevents women from being arbitrators. • By deepening their own experience in international arbitration through initiatives like strategic engagements with the SCCA. 4. The strong efforts of the SCCA Pursuant to its Vision 2030 initiative (announced in 2016), the KSA seeks to bolster economic diversification and is actively encouraging foreign investment in the Kingdom. As part of these goals, the KSA is keen to ensure investor confidence in the KSA's commercial disputes framework and accordingly, it established the SCCA, the KSA’s first arbitral institution, designed to effectively implement the New Arbitration Law and provide flexible, time-and-cost effective dispute resolution procedures that comply with Sharia law. While officially established by a Saudi Minister council decision in 2014, the SCCA became operational in late 2016 when it physically opened in Riyadh and published its Arbitration Rules. The SCCA administers arbitration and mediation proceedings in both Arabic and English. The SCCA's vision is to become the region's preferred ADR provider by 2030. The SCCA is a sophisticated institution, which, to date, has taken impressive steps to promote ADR, including: • by establishing a modern, effective set of Arbitration Rules which are based on the UNCITRAL Arbitration Rules and drafted in accordance with the New Arbitration Law, with 2021 revisions to permit more cost-effective proceedings and an expedited arbitration procedure; • by introducing Codes of Ethics for arbitrators and mediators respectively; • by forging partnerships with government and the private sector to promote arbitration and by closely collaborating with the judiciary; • by providing state of the art facilities in Jeddah and Riyadh with modern hearing rooms and a wide range of services, including an online interactive SCCA costs calculator; and • by investing in ADR education - for example, the SCCA partnered with CIArb to create a "SCCA-CIArb Pathways to Fellowship" (an arbitrator and mediator accreditation programme). Users' confidence in SCCA arbitration is apparent from the statistics: between October 2016 and 2021, the SCCA received in the region of 200 cases, totalling circa USD one billion, involving domestic and international parties. Over 70% of those cases were filed in the years 2020 and 2021, highlighting the SCCA's increased popularity in the last few years as the institution has gained increased local and global traction. Concluding comment Over the last decade, the KSA has made significant progress in creating a robust and effective arbitration regime. Arbitration is a mechanism well suited to handling disputes that may arise out of Saudi Vision 2030 and it will be interesting to see if, in the coming years, the KSA attracts an increasing number of international arbitration cases and is perceived as an effective, efficient and safe international seat, competing with other established centres in London, Paris, Singapore, Hong Kong, New York, Geneva, Stockholm and Dubai.
“
Back >
Erica Arcudi Associate, London E: earcudi@mayerbrown.com T: +44 20 3130 3263
View Profile
Gerard Moore Associate, London E: gmoore@mayerbrown.com T: +971 4 568 2208
Alain Farhad Partner, London E: afarhad@mayerbrown.com T: +971 4 568 4950
Raid Abu-Manneh Partner, London E: rabu-manneh@mayerbrown.com T: +44 20 3130 3197
Based broadly on the UNCITRAL Model Law, but adapted to deal with Sharia law, the New Arbitration Law brings the KSA's arbitral framework in line with best practices in international commercial arbitration.
Al Akeel Authors: Dr. Meshal Al Akeel, Marc Saroufim and Sultan Abdeen
Marc Saroufim Partner, London E: msaroufim@alakeellaw.com.sa T: +966 50 704 4261
Dr. Meshal Al Akeel Chairman, Saudi Arabia E: malakeel@Alakeellaw.com.sa T: +966 50 423 2801
Sultan Abdeen Associate, London E: sabdeen@Alakeellaw.com.sa T: +966 53 777 7804
Defined in the New Enforcement Law as "the Chairman and Judges of the Enforcement Circuit, the Enforcement Circuit Judge, or the Judge of the Single Court", effectively a new jurisdiction created in 2007 to handle all enforcement issues.
3. Ibid
Saudi Arabia was ranked 16th out of 141 economies for "judicial independence" and 17th for "efficiency of legal framework in settling disputes" in the World Economic Forum's Global Competitiveness Report (2019)
2.
4.
As at the end of 2021 according to "A Progress Report on Saudi-Arabia's arbitration-friendliness" by James McPherson (SCCA), GAR Middle East and Africa Arbitration Review 2022.
1
1.
"A Progress Report on Saudi-Arabia's arbitration-friendliness" by James McPherson (SCCA), GAR Middle East and Africa Arbitration Review 2022.
5.
2
3
4
5
Ali Auda Associate, London E: aauda@mayerbrown.com T: +44 20 3130 3035
Lisa Dubot Global PSL, Paris E: ldubot@mayerbrown.com T: +33 1 53 53 83 98
Eye on Emerging Markets | Q1 2022
Building on tax exemptions and accessible corporate maintenance rules, over the years Romania has established itself as a hub for technological developments and financial start-ups. However, certain types of business have not caught wind in Romania due to the legal framework which raised several entry barriers
One of the more important things to be noted in the Crowdfunding Law is the clear distinction....that accepting funds from investors does not constitute deposit-taking and therefore is not a regulated credit activity which is reserved for credit institutions.
Crowdfunding is one example. Globally, crowdfunding popularity has increased as more startups have turned to this type of funding source to raise capital for their projects. According to Million Insights, a market research and consulting company, the global crowdfunding market size is estimated to reach USD 1.30 billion by 2028. Following the entry into force of Regulation (EU) 2020/1503 on European crowdfunding service providers for business (the "Regulation"), Romania may catch up with this industry as well. To this end, Romania has recently passed Law no. 244/2022 on certain measures to give effect to the Regulation (the "Crowdfunding Law"). Many of these measures reflect the local need for investor protection and establish the supervision powers of the Financial Supervisory Authority (the "FSA") in respect of crowdfunding service providers (CSPs). One of the more important things to be noted in the Crowdfunding Law is the clear distinction – as pointed out in Preamble 11 of the Regulation – that accepting funds from investors does not constitute deposit-taking and therefore is not a regulated credit activity which is reserved for credit institutions. Complementary to the above exception, granting loans to project owners through a CSP is not deemed a lending activity, unless it is performed by a non-banking financial institution (a special type of financial institution established by Law no. 93 on non-banking financial institutions). This is particularly interesting given the complex regulatory background whereby many newly founded digital companies face the big question of whether or not the activities they are performing are regulated. The other noteworthy topic is the fact that such loan agreements concluded on the platform between the investors and the project owners, as well as the ancillary security interests concluded to secure the former, are considered writs of execution. The key aspect for investors here is that they are able to enforce such agreements without the need to go through lengthy court proceedings. This could prove rather useful for more sophisticated investors in complex cross-border deals with multiple parties involved, which may well become the norm. Finally, CSPs are entitled to consult and request information from the local credit bureau (the "RO Credit Bureau", Romanian: Centrala Riscului de Credit). The RO Credit Bureau is an entity held by the National Bank of Romania, specialized in the collection, storage, and centralization of information on the exposure of all participating entities (such as credit institutions or payment institutions, among others). Being entitled to such information, CSPs will have access to the data of the debtors of the participating entities with an exposure of more than RON 20,000 (approx. EUR 4,000) such as name, sector of activity, occupation, type of credit agreement, and many more as such.
Written by Claudia Chiper and Cătălin Sabău, Wolf Theiss
As a result, investors will be able to rely on the sound assessment made by the CSP before investing in a company. Further, it will prove especially useful for sophisticated investors for the purposes of their own internal KYC checks to rely on already existing information that was previously vetted and provided through the RO Credit Bureau. This is of course an aspect that the parties must handle on a contractual basis. Despite all the things done right by the Crowdfunding Law and the Regulation, there is room to improve the legal framework and pave the way for a successful market for both investors and CSPs alike. An example in this sense is the failure of the FSA to establish the required registry for authorised CSPs. As of the date of this article there is no Romanian established CSPs although there are CSPs which are active on the Romanian market such as Seedblink, which has deemed itself as a crowdfunding service provider. Furthermore, the lack of grandfathering provisions after November 2022 at a European level and the lack of a previous legal framework in Romania makes it easier for new and existing CSPs alike to become authorised by the FSA. To conclude, the crowdfunding market in Romania seems primed to make a case for itself as an alternative to common lending practices.
Unlike private companies, sovereigns and SOEs have to take into account political considerations as well as ESG-related and economic considerations.
Bob Palmer Partner, London E: bpalmer@mayerbrown.com T: +44 20 3130 3363
Cătălin Sabău Associate, Finance | Wolf Theiss E: catalin.sabau@wolftheiss.com T: +40 21 308 81 00
Claudia Chiper Partner, Finance | Wolf Theiss E: claudia.chiper@wolftheiss.com T: +40 21 308 81 00
In 2021, the population of Uzbekistan surpassed 35 million. This, as well as the country’s continued economic development, has further pushed demand for electricity which is estimated to grow to over 100 TWh by 2030, a substantial increase from 61 TWh in 2018.
After joining the Paris Agreement, Uzbekistan pledged to reach carbon neutrality by 2050. The President’s decrees further established interim goals in respect of renewables: to increase the share of renewables to 20% of all sources of electricity production by 2025 and to 25% by 2030. In 2020, the Ministry of Energy of Uzbekistan published a concept note on the power capacity development in the country for the 2020-2030 announcing its plans to develop 5 GW of solar and 3 GW of wind power. After procuring low tariffs from developers via competitive tenders, the Ministry of Energy suggested to increase the projected PV solar and wind capacity to 7 GW and 5 GW, respectively. To achieve these ambitions goals, Uzbekistan would require a solid pipeline of projects, backed by reliable sponsors and lenders. In one of the recent reports developed with the support of EBRD, it was opined that that it is “technically and economically possible” for Uzbekistan “to achieve carbon neutrality by 2050”. While some initial renewable projects have been implemented based on bilateral investment agreements (“IA”) under Uzbekistan’s foreign Investments Law, recent renewable energy (“RE”) projects tendered as public-private partnerships (“PPP”) under the PPP Law helped to procure increasingly competitive tariffs, which now may be indexed to foreign currencies. Following the adoption of a new law on currency regulation (“Currency Law”) in October 2022, projects implemented via PPP or IA have been excluded from the restriction prohibiting indexation of prices/tariffs to foreign currencies, provided a Presidential decree allowing such indexation is issued. PPP and IA structures have, however, different regimes applying to opening/utilization of foreign accounts. As a general rule established by the Currency Law, resident companies, such as RE project companies, are required to obtain a Presidential decree which would authorize them to open offshore accounts. The PPP Law, however, provides for an exception to this rule authorizing a private partner (that is a resident of Uzbekistan) to open offshore accounts, provided that such authorization and the purposes for use of the offshore accounts are reflected in the relevant PPP agreement or GSA.
Written by Sherzod Yunusov, Kinstellar
Projects initiated by the government would require a more rigorous procedure should they be structured via PPP. In particular, the PPP law mandates that for projects worth over USD 1 million a 2-staged tender shall be conducted (consisting of RFQ and RFP stages). Those bidders that have been prequalified during an RFQ stage, would be eligible to participate in the RFP stage, which usually includes the following documents: (i) instructions to potential bidders, (ii) a draft PPA/PPP, (iii) a draft government support agreement (GSA), and (iv) a draft land lease agreement (LLA). In a typical RE PPP transaction, JSC National Electric Grid of Uzbekistan would act as the public partner and purchaser of generated energy under the PPA/PPP. The Ministry of Finance is authorized under the PPP Law to execute a Government Support Agreement on behalf of the Government. Until recently, LLAs were normally executed with the public partner. As part of the ongoing land reform, non-agricultural land plots for PPP projects are set to be leased through a governmental body, such as the Ministry of Energy. Both PPPs and IAs are often governed by Uzbek law. Due to this, sponsors and lenders should be aware of peculiarities under Uzbek contract law that, similarly to many other civil law jurisdictions, has a concept of “essential terms” set forth for certain agreements, including in respect of PPPs and IAs. For example, article 27 of the PPP Law lists the provisions that “must” be indicated in a PPP agreement. In the absence of such essential terms, an Uzbek court (or an arbitration institution applying Uzbek law) taking a formalistic approach to interpretation may find a non-compliant PPP agreement as not concluded (since the parties have not reached an agreement as to all essential terms provided for by the applicable law) or invalid (since the agreement does not comply with the requirements of the law as to its content). Although the PPP law was introduced relatively recently (first coming into force in June 2019 and substantially amended in January 2021), it appears that going forward renewable energy projects in Uzbekistan will be predominantly based on PPP models, as the Government reportedly intends to structure upcoming projects in this space as PPPs, to offer private investors a balanced risk allocation and continue to procure competitive tariffs.
The Ministry of Finance is authorized under the PPP Law to execute a Government Support Agreement on behalf of the Government. Until recently, LLAs were normally executed with the public partner. As part of the ongoing land reform, non-agricultural land plots for PPP projects are set to be leased through a governmental body, such as the Ministry of Energy.
PPP and IA structures have, however, different regimes applying to opening/utilization of foreign accounts. As a general rule established by the Currency Law, resident companies, such as RE project companies, are required to obtain a Presidential decree which would authorize them to open offshore accounts.
Sherzod Yunusov Partner, Kinstellar E: sherzod.yunusov@kinstellar.com T: +998 78 150 6221
On 10 August 2022, the Loan Market Association ("LMA"), in association with Lloyd's Market Association ("Lloyd's") and the International Underwriting Association ("IUA"), published a model form of credit risk insurance policy ("CRI Policy").
...the CRI Policy should provide a recognisable framework and boilerplate to achieve greater efficiencies and standardisation across the industry (particularly for new entrants), which in turn allows market participants to focus on the commercial drivers rather than the form of documentation.
The CRI Policy represents the culmination of two years' work of a working party consisting of credit insurance market stakeholders, including law firms, banks, brokers, insurers, Lloyd's and the IUA. As explained in the LMA's user guide relating to the CRI Policy, it has been drafted: 1. on the basis that it may be used as unfunded credit protection for regulatory capital, as well as for other prudential regulatory purposes; 2. with regard to the requirements for unfunded credit risk protection pursuant to the CRR; 3. for the purposes of insuring a single borrower risk under a loan agreement, whether or not secured; and 4. as a basic starting point for a policy of its type, subject to case specific customisation and subsequent negotiation (in other words the CRI Policy will not, without customisation, necessarily be suitable for a particular transaction or provide the requisite protection). Why is the CRI Policy so important? As the first insurance policy document produced by the LMA, the CRI Policy is a significant development, and a landmark achievement, for the credit insurance market; it represents an important step towards achieving a well understood, standardised form of documentation for a widely used credit risk mitigation tool. The fact that the CRI Policy was published by the LMA, a trusted industry body, to which many banks look to provide template documentation, together with a working group comprised of all major stakeholders in the credit insurance industry affords the document credibility as a reasonable and even-handed starting point for negotiations, which should reflect standard market positions. In addition, market commentators have also noted that the CRI Policy will help to evidence a level of standardisation of core terms to banking regulators, which has been a key regulatory concern in the industry. Finally, and as mentioned in the LMA press release relating to the CRI Policy, the CRI Policy should provide a recognisable framework and boilerplate to achieve greater efficiencies and standardisation across the industry (particularly for new entrants), which in turn allows market participants to focus on the commercial drivers rather than the form of documentation. Commentary The CRI Policy is not, of course, a substitute for expert advice in a sophisticated product area (and nor does it claim to be); all users will need to confirm for themselves whether a credit risk insurance policy (whether based on the CRI Policy or otherwise) satisfies applicable regulatory requirements (whether in respect of CRR or otherwise). Similarly (and as also highlighted by the LMA press release) the CRI Policy is not intended to be a substitute for, or to override, terms already negotiated between, and agreed by, specific insured lenders and their insurers; it would be ineffective as a "one size fits all" document. These factors do not constitute shortcomings with the CRI Policy; it is, however, important to acknowledge – as the CRI Policy does – what a model form of this kind is intended to achieve. As the LMA's user guide relating to the CRI Policy aptly puts it, "the model form is intended to form the basis of a sensible first draft for the subsequent negotiation of a basic credit risk insurance policy". In other words, there is now something helpful and market credible on the page to start with, but it will require transaction specific customisation.
Written by David Fraher, Chris Chapman, James Whitaker and Thea Wilkinson
If the market adopts the recommended form as a starting point, this could help with CRR requirements such as Article 213(1)(b), which requires that credit risk mitigation be “clearly defined and incontrovertible” and Article 213(1)(c), which requires that "the credit protection contract does not contain any clause, the fulfilment of which is outside the direct control of the lender". However, (a) we expect many brokers and insurers to continue to prefer to use their own standard form policies rather than this LMA document, at least initially, and (b) the LMA recommended form may not help with some of the thorniest of issues in this area, such as the fact that the CRR requires a lender to be able to claim directly under the credit risk management product, whereas in many syndicated loans, it is the security agent who is named as an insured party rather than each lender. The UK financial regulators have not officially endorsed the recommended from as a means of satisfying the requirements under CRR. However they take account of industry guidance in their decision making and may treat policies which follow the model as more likely to be compliant with the requirements and policies which are materially different as less likely to be compliant. Perhaps more importantly, the recommended form might help the insurance industry to settle its thinking on what an acceptable wording looks like and that may promote the availability of CRR compliant policies within the market. For more information on the CRI Policy, please speak to your usual Mayer Brown contact.
David Fraher Senior Associate, London E: dfraher@mayerbrown.com T: +44 20 3130 3248
1. "CRR" means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, including as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018.
James Whitaker Partner, London E: jwhitaker@mayerbrown.com T: +44 20 7398 4627
Chris Chapman Partner, London E: cchapmanmayerbrown.com T: +44 20 3130 3344
Thea Wilkinson Consultant, London E: twilkinson@mayerbrown.com T: +44 20 3130 8130
In a significant step for the recognition of English court judgments, the UAE Ministry of Justice (the “MOJ”) has issued a communiqué to the Director General of the Dubai Courts (the “communiqué”) confirming that judgments issued by the English Courts should now be enforced in the UAE based on the principle of reciprocity.
Under the same conditions as prescribed in the law of that [foreign] country for the execution of judgments and orders issued in the UAE.
In the absence of a treaty between the UK and the UAE providing for the mutual recognition and enforcement of judgments, the ability to enforce an English court judgment in the UAE is entirely a matter of the domestic law of the UAE. The enforceability of foreign judgments in the UAE is governed by Article 85 of Federal Cabinet Decision No. 57 of 2018 (implementing the UAE Civil Procedure Code) (the “Cabinet Decision”). This provides that a foreign judgment may be executed in the UAE: In short, this means that the UAE will enforce a foreign judgment where there is reciprocity of enforcement between the UAE and the relevant foreign jurisdiction. The recent communiqué follows the (now final) English High Court decision in Lenkor Energy Trading DMCC v Puri [2020] EWHC 75 (QB), which considered the enforcement of a judgment issued by the Dubai courts. In the instant case the English courts were asked not to enforce a Dubai court judgment on the basis it would be contrary to public policy on various grounds, including that the underlying contract was tainted by illegality. However, the public policy arguments made before the court were not accepted, the High Court making it clear that, in order to rely on a public policy defence as a matter of English law, “it is the judgment and not the underlying transaction upon which the judgment is based which must offend English public policy”. It therefore matters not that the fact pattern on which a foreign judgment is based might generate a different outcome had the same facts been tried before the English courts, so long as recognising the judgment itself would not offend English public policy. The judgment of the Dubai courts in its original form was therefore enforceable in England and it is this that has led the MOJ to determine there is reciprocity of enforcement by the English courts.
Written by Barry Cosgrove, Chris Street and Hannah Davies
However, reciprocity alone does not mean that the UAE courts will now automatically enforce English court judgments. Article 85(2) of the Cabinet Decision also requires the UAE courts to look at (i) whether the UAE courts have (or had) exclusive jurisdiction over the dispute, (ii) whether the judgment to be enforced conflicts with a judgment of the UAE courts, and (iii) whether the judgment is consistent with public policy in the UAE. These additional requirements could therefore serve to limit (at least in some way) the extent to which English court judgments are recognised in the UAE. In particular: • the UAE courts have historically tended to assume jurisdiction in any case involving a UAE national or entity, irrespective of the terms of any underlying document (although the criteria in the Cabinet Decision that jurisdiction needs to be “exclusive” ought to be helpful); • concurrent proceedings may result in conflicting judgments, in which case any judgment of the UAE courts will likely prevail; and the UAE courts have very broad discretion on matters of public policy, which also extends to any outcome that would be incompatible with Shari’a (Islamic) principles. It is also worth noting that there is nothing in the Cabinet Decision that expressly prohibits a UAE court from reviewing the merits of an English court judgment, even if the criteria in Article 85 are otherwise satisfied. To date, it has been common to include an arbitration clause in contracts with a nexus to the UAE due to the uncertainty with respect to the enforcement of foreign court judgments by the UAE courts. Parties looking to enforce an English judgment in the UAE may take some comfort from MOJ’s “desire to strengthen fruitful cooperation in the legal and judicial field”, but, at least in the short term, we expect cross-border agreements to still feature arbitration provisions until it is clear how the UAE courts give effect to this communiqué (particularly given it does not have any binding legal effect).
Hannah Davies Associate, London E: hdavies@mayerbrown.com T: +44 20 3130 3258
Chris Street Senior Associate, London E: cstreet@mayerbrown.com T: +44 20 3130 3831
Barry Cosgrave Partner, London E: bcosgrave@mayerbrown.com T: +44 20 3130 3197
