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:
Q1: Have the UAE, Egypt or Saudi Arabia issued any legislation detailing the measures taken against Qatar?
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.
Q2: What are the ramifications of this boycott on the banking system and financial markets?
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.
Q3: Our headquarters (based in Cairo, Dubai and Riyadh) have ongoing contractual agreements with Qatari companies (public or private). What is the impact of the boycott on these agreements?
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.
Q4: I am a business owner in Egypt and have attested a number of official documents by the Qatari Ministry of Foreign Affairs. The official documents will be used in Egypt and I need to attest them by the Egyptian Embassy in Qatar. Now that the diplomatic mission has been withdrawn, how can I attest the official documents? Would the Egyptian MOFA accept an attestation?
Q5: I am an Egyptian involved in a transaction with a Qatari investor. How will I be affected?
Q6: Can Qatari vessels pass through Egyptian ports? What if the vessel is not carrying the Qatari flag but Qatar is the final destination?
Q7: Can an Egyptian national or a foreigner residing in Egypt travel 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.
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