01 Nov 2011

RULES OF COMPETITION: NEW FIELD TO COMPETE

Authored by: Omar Al Heloo

RULES OF COMPETITION: NEW FIELD TO COMPETE

Omar Al Heloo discusses the developments in UAE competition law.

In brief:

  • The GCC States are still widely considered to be attractive environments for investment.
  • The GCC States have carried out many initiatives to protect and promote competition in the market.
  • A major beneficiary of any competition legislation will be the legal sector.
  • This field requires cooperation between international firms and local firms.
  • Competition rules are now taken very seriously and this trend can be expected to emerge and spread within the GCC.

In the past twenty years, the six States of the Gulf Cooperation Council (GCC), namely Saudi Arabia, Oman, UAE, Qatar, Kuwait and Bahrain, have witnessed economic growth, together with development in technology and investment opportunities in many sectors. Currently, despite the cautious attitude of many investors due to instability highlighted by the Arab Spring and amplified by the world financial crisis, the GCC States are still widely considered to be attractive environments for investment. This arises for many reasons including the relatively stable political environment of the GCC, together with the significant government support of many sectors. Nevertheless, the GCC States face challenges in conforming to the requirements of the World Trade Organization (WTO), for instance in promoting the most fundamental doctrine of the free market – competition.
 
With the objective of complying with WTO requirements and the needs of adopting modern economic notions, the GCC States have carried out many initiatives to protect and promote competition. The Kingdom of Saudi Arabia was the first GCC State to introduce competition law by virtue of the Royal Resolution No. (M/25) dated 22 June 2004, which came into force on 31 December 2004. This was followed by Qatar, by Law No.19/2006 concerning protection of competition and prevention of the monopolistic practices, and then Kuwait by Law No.10/2007 concerning protection of the competition.
 
The UAE, Bahrain and Oman are currently in the process of establishing specific laws to protect competition and prevent monopolistic practices. It should be noted, however, that these countries already have laws in place that address some aspects of the issues. Moreover, with the aim of establishing a Gulf common Market, the Supreme Council of the GCC has established a specialised committee to discuss and prepare the draft of a unified competition law for the GCC.
 
One of the major beneficiaries of any such legislation will be the legal sector. As the concept of anti-trust becomes more enshrined in legal systems of GCC States, corporations and investors will turn to law firms specialising in this field. Accordingly, lawyers will need to be involved in forming and determining the direction to be adopted by the bodies and committees for protection of competition in the GCC.
 
Moreover, this field may lead to further cooperation between international firms with experience in dealing with competition cases and local firms who have experience in domestic laws, traditions and culture. Furthermore, experienced anti-trust lawyers and legal firms, in accordance with their social responsibilities as well as their personal interests, will contribute to training and developing young local lawyers who seek to specialize in competition law.
 
Accordingly, the introduction of competition legislation will help establish a new and expanded practice area for law firms and lawyers to deliver in the GCC States especially given that competition rules are now taken very seriously in the region. For example, in Saudi Arabia the General of the Competition Protection Council has recently filed five separate claims against eight companies operating in the field of medical gases in the Kingdom. This is just one of many examples of how the Kingdom of Saudi Arabia is enforcing its newly enacted laws. This trend can be expected to emerge and spread within the GCC.
 
On the other extreme, local traders in the GCC in recent decades have established important and highly lucrative agency relationships with foreign manufacturers. Often these relationships are exclusive and difficult to modify or terminate under prevailing laws. This is one example of an area of law where WTO obligations, competitive practices and legislation will give rise to interesting debate and developments in the GCC.