As many of my readers are based in the Gulf and surrounding regions I provide the latest update on the diplomatic crisis with Qatar. It is reproduced from an excellent newsletter summary (June 12) provided by various Gulf-based law offices of Baker and McKenzie. Many of the FAQ’s look extremely helpful. The earlier update can be found here.
Before delving into these latest developments, some useful links for those in the UAE who are affected by the crisis: A directive has been issued concerning UAE-Qatari joint families who are residing in the UAE; Saudi Arabia, Egypt, the UAE and Bahrain have issued a statement on lists of designated terrorist organisations, individuals linked with Qatar. The list contains the names of 59 individuals and 12 entities.
The latest developments from Baker & McKenzie are reproduced below:
A. Save for the government statements published in the press, to the best of our knowledge, the boycott has not been supported by decrees and/or legislation defining procedures, limitations, thresholds and options.
On 9 June, the UAE Council of Ministers issued Resolution No. 18 of 2017 designating 59 individuals and 12 entities as terrorists or terrorist organizations. The resolution requires all supervisory authorities to identify all individuals or entities having any financial, commercial, or technical or any other kind of relationship with those designated terrorist or terrorist organizations. A full copy of the resolution is not yet publically available.
A. In the UAE: In implementation of the resolution of the UAE Council of Minister, the UAE Central Bank issued two notices requiring all banks, finance and investment companies operating to do the following:
In Saudi Arabia: We understand that Saudi Arabia’s central bank has ordered lenders in the country not to increase their exposure to any Qatari clients. Saudi Arabian Monetary Agency (SAMA) also told banks licensed in the country that they should not process any payments denominated in Qatari riyals. The order to refrain from increasing exposure to Qatar is being applied to include treasury investments, loans, letters of credit and trade-finance facilities. However, other press reports state that money transfers between bank accounts in Saudi Arabia and Qatar will not be affected, and SAMA has declined to comment on the press reports or provide any further information. As far as we are aware, SAMA has not made these orders publicly available.
In Egypt: The Central Bank of Egypt has issued a press release confirming that Qatari Riyal is an official currency used in Egypt and that there are no restrictions on dealing in Qatari riyals or exchanging Qatari riyals into any other currency.
The press release reinforced that QNB Al Ahly Bank (which took over NSGB in Egypt in 2014) is an Egyptian joint stock company, licensed and supervised by the Central Bank of Egypt and continues to service all its customers, without any disruption. The press release also stated that the financial position of QNB Al Ahly Bank is strong.
It is important to note that halting banking transactions in Egypt would only apply to those transactions involving individuals or entities designated as supporting terrorism (by a court order or decree). Typically, the Central Bank of Egypt issues a list designating such individuals/entities addressed to all banks operating in Egypt restricting transacting with those individuals or entities.
A. The boycott does not legally prevent companies headquartered in the countries that have cut ties with Qatar from continuing to do business with Qatari public or private companies and honor their ongoing contractual obligations.
The current impacts may be practical in nature. In the long term, it may become logistically or financially cumbersome to peform contractual obligations in Qatar.
For instance, in the UAE, any banking operations will be subject to the enhanced customer due diligence process if effected through one of the Qatari banks listed in the notice of the UAE Central Bank. Also, in the UAE, Saudi Arabia and Egypt, increased shipping costs will apply as a result of the change of shipping routes.
For those companies with ongoing contractual agreements or anticipating entering into agreements with Qatari companies in the short term, it is necessary to assess the financial exposure associated with possible delays or increased cost and potentially contractual breaches and events of default.
A: The Egyptian Ministry of Foreign Affairs has indicated that the Greek embassy will be entrusted with the Egyptian diplomatic and consular affairs in Qatar. This should include the attestation and certification services; however, this remains untested.
A: There are currently no restrictions on investments between Qatar and Egypt. However, in practice, Qatari investors may potentially face difficulties from a practical standpoint in obtaining certain approvals and consents, in particular, those related to national security.
A: Reports stated that the Egyptian government has banned all vessels carrying the Qatari flag from passing through Egyptian ports. According to the statement of the Egyptian Ministry of Transportation, the ban applies to any shipping line between Egypt and Qatar. However, we have not yet seen any decrees or directives issued in this regard so far.
A: Yes. Egyptian nationals and foreigners residing in Egypt are not restricted from traveling to Qatar. However, due to the cutting of diplomatic ties between Egypt and Qatar and the closure of the Egyptian airspace for Qatar Airways, it may not be possible for an Egyptian national or anyone residing in Egypt to travel directly to Qatar.
It is important to note that in 2015, the Egyptian Ministry of Interior introduced a requirement that Egyptian nationals (from the age of 18 to 45) traveling to Qatar obtain a “security clearance” from the National Security Authority, before traveling.
Baker & McKenzie is continuing to monitor developments closely as the situation is subject to change without notice. As I receive any further newsletter from Baker & McKenzie on this topic, I will reproduce it to apprise readers of significant changes.Back to Articles Back to Virginia La Torre Jeker J.D.
The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
Virginia La Torre Jeker J.D.
Virginia La Torre Jeker J.D., is based in Dubai. Virginia has been a member of the New York Bar since 1984 and is also admitted to practice before the United States Tax Court. She has over 30 years of experience specializing in the international aspects of US tax, including FATCA. She has been quoted in the New York Times and Newsweek, and is regularly quoted in many local news articles and publications."
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