International Conventions Comparison Study between EU and GCC
International Conventions Comparison Study between EU and GCC
The study compares the company laws as applicable in the EU and the GCC. The study shows that the teams in charge of commercial operations in both regions acknowledge the importance of having structures in place that define how corporations ought to perform their duties, when operating locally and internationally. The developers in each of these regions seem to appreciate that adequate awareness and knowledge of commercial law encourages economic integration. Investing in this area according to the report by IDLO (2020) allows poorer countries to embrace more effective bilateral or international trade agreements, and fosters resource-rich nations to cope with major foreign investment flows. The analysis indicates that the regulation in the EU binds all member states while the framework in the GCC is based on the provisions of each member state that develops structures to guide their activities and trading. An analysis of each form shows the need to have effective guideline that regulate commercial practices to achieve order and effectiveness in this area.
Description of the Company Law in the EU
The company law in the European Union (EU) is organized in the Directive (EU) 2017/1132, and parties continue to function different company acts, which are altered from time to time to adhere to the regulations and directives in the EU. Ongoing initiatives towards creating an efficient and contemporary company law and corporate governance structure for European activities, investors, and workers seek to enhance the business environment in the region (European Parliament, 2022). The company law rules whose legal basis are provided for in Articles 49, 50, and 54 of the Treaty on the Functioning of the European Union covers key areas such as the establishment, capital and disclosure needs, and operations (divisions and mergers) of organizations (European Parliament, 2022). The regulation also covers issues impacting on corporate governance, emphasizing on relationships between a corporation’s management, stakeholders, board, and primary shareholders, which are critical in determining how an organization is controlled and managed. The regulation abides the 17 Member States comprising of Sweden, Slovenia, Poland, Luxembourg, Slovakia, Romania, Hungary, Netherlands, Denmark, France, Finland, Croatia, Czech Republic, Croatia, Cyprus, Bulgaria, and Germany (European Parliament, 2022). The developers of the regulation engage in continuous improvements in a bid to make the provision more impactful and informative.
The EU Company Law provides information that guide organizational operations entailing more than one nation. Directive (EU) 2017/1132 elaborates on the conditions that foreign branches of organizations must achieve to function within the region. For instance, Directive 2014/86/EU on the mutual system of taxation appropriate in the circumstance of parent corporations and branches of dissimilar affiliates make known to tax rules that are unbiased from the point of view of rivalry for groups of firms of diverse members (European Parliament, 2022). The regulation further informs that the notion of double taxation of dividends is not applicable, especially those dispatched by an affiliated firm in one member country to its parent firm in another state. On the other hand, Directive 2004/25/EC defines how takeover bids happen. The regulation acknowledges the need to safeguard the interests of holders of stocks and securities of firms regulated by the law of an affiliate state when whose firms are the focus of takeover bids or if alterations of management and at least some of their shares and securities are transferred to trading on a governed market in a member country (EUR-Lex, 2014). In addition, the company law in the EU gives adequate information on guarantees regarding the financial condition of the firms (European Parliament, 2022). Directives 2013/34/EU and 2006/43/EC that sheds light in this area informs that to ensure that information offered in accounting is the same in all parties, company accounts are obliged to give an honest reflection of the organization’s profit or loss, liabilities, assets, and overall financial position (European Parliament, 2022). Also part of the Company Law in the EU is that it gives directives on financial information to be issued by firms and auditing to enhance the integrity of financial statements.
Description of the Commercial Law in the GCC
Similar to the EU, the GCC has a set of regulations that determine how companies conduct their operations locally and internationally. The law in this case abides the six GCC member states comprising of Oman, Qatar, Bahrain, Kuwait, the Kingdom of Saudi Arabia (KSA), and the United Arab Emirates (UAE). An instrumental element in the GCC commercial law is that it advocates for appealing to foreign investment and technology transfer in alternative forms of energy (renewables) (Barrbiz, 2010). The framework also stresses on trade of services, technology, and environmental goods. Moreover, economic policies in the GCC encourage operators to consider investing in non-oil and gas sectors because so far existing reserves are under significant strain.
Whereas the company laws in the GCC tend to have certain similar features, it is apparent that what makes them different from that of the EU is that individual member states in the GCC tend to follow their regulations unlike in the EU where the 17 member parties abide by the primary law enshrined in Directive (EU) 2017/1132. However, some features that are present in one of the countries is available in other GCC nations, which gives a holistic view of the commercial law in the region. In the UAE, the Ministry of Economy is steering the development of policies and regulations that would facilitate how companies in the countries conduct their operations are relate with firms outside the state. The country is making significant transformations in its legal structures to comply with international requirements and to create a safe environment for all companies to work. In addition, the country has introduced the Competition Law that the government hopes will improve healthy competition and will minimize monopoly practices in accordance with the suggestions of the World Trade Organization. Similar structures exist in other GCC nations, which reaffirms the significance that companies attach to such regulations. Each of the GCC Member States hopes to continuously improve its structures to achieve better results.
A common element that all GCC nations look forward to is increased focus on interconnectivity. An influential theme impacting demand for services and goods across the region is the establishment of interconnectivity infrastructure, ranging from advanced data networks to railway systems. The urge for economic development facilitated the rail developments across the regions. At least 1,242 mile rail system was constructed across the GCC between 2010 and 2020, a development that many parties believe will boost economic practices and trade across the region (Barrbiz, 2010). The network stretching from Kuwait to Oman is set to improve connectivity and movement of goods and services across the border, thus enhancing efficiency and fostering productivity and competitiveness. The law emphasizes on such projects emphasizing that interconnectivity investment inherently results in the growth of ICT infrastructure (Barrbiz, 2010). Member nations and interested parties in North African nations that are mostly Arabic states are committed to increase investment in this area while facilitating the development of policies that encourage such formations. In KSA, state-initiated initiatives such as 10×10 program continue to improve commercial operations in the Kingdom. The KSA constitution, KSA Labor Law, and KSA Law of Patents are some of the many legislations that determine operations.
Recommendations for Businesses
Businesses that wish to establish their businesses or create subsidiaries in either the EU or GCC must conduct a thorough analysis of the laws in each place before settling on the most suitable one. A suitable framework that could guide the exercise is the SWOT analysis that requires operators to consider the strengths, weaknesses, opportunities, and threats in each of the directives and find out whether they suit the organizational needs and aspirations. However, this paper holds that the decision on whether to invest in the EU or GCC entirely depends on a company’s interests, resources, and aspirations. It is because the laws in both regions seem to touch on key issues that influence business operations. Besides, each of these regions have their strengths and limitations. A company that wishes to venture in the EU market, for example, may find the region appealing because of the elaborate laws on mergers and acquisitions (M&As) (European Commission, 2022). In addition, the EU market may appear enticing because the structure defines what steps a firm need to follow when expanding to foreign markets, a strategic approach that many firms use to expand their brands. On the other hand, a business may be attracted to the GCC because of the emphasis on using superior technology, and because of increased calls to embrace superior technology. Thus, examining each of these provisions prior to entering a particular market offers the chance to make the wise choice.
The study compares and contrasts the company law and commercial law that are applicable in the EU and GCC, respectively. The EU framework touches on various key issues that impact on local and multinational corporations. The directive offers guidance concerning ways of establishing a company, as well as give details on organizational operations involving more than a single state. The study illustrates how the commercial law in the GCC touches on equally essential elements that impact on companies operating in the region. The main variation with the regulations in both regions is that whereas the provision in the EU abide all the 17 member nations, each of the GCC nations have regulations that determine commercial activities in the respective countries. However, certain common frameworks and interests exist in the GCC law. The study reveals how the companies that wish to establish their businesses in either of the markets need to conduct a thorough analysis of each regulation to find out whether their provisions are suitable and likely to impact positively on the organization’s operations. It is essential to pay attention to the provision in each framework because companies tend to differ in their strategic goals and activities and ruling that a specific market is more appropriate compared to others may not be convincing to all parties. Operators learn valuable lessons from this analysis because they learn the importance of examining existing commercial laws and finding out how they impact on organizational performance locally and in foreign markets.
Barrbiz. (2010). Commercial laws in the GCC. Retrieved April 21, 2022, from https://cdn.ymaws.com/www.wipp.org/resource/resmgr/newsroom_links/barrbiz_-_gcc_commercial_law.pdf
EUR-Lex. (2014). Directive 2004/25/EC of the European parliament and of the council of 21 April 2004 on takeover bids. Retrieved April 21, 2022, from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02004L0025-20140702
European Commission. (2022). Company law and corporate governance. Retrieved April 21, 2022, from https://ec.europa.eu/info/business-economy-euro/doing-business-eu/company-law-and-corporate-governance_en
European Parliament. (2022). Company law. Retrieved April 21, 2022, from https://www.europarl.europa.eu/factsheets/en/sheet/35/company-law
IDLO. (2020). Commercial law. Retrieved April 21, 2022, from https://www.idlo.int/what-we-do/economic-opportunity/commercial-law#:~:text=A%20sound%20knowledge%20and%20practice,handle%20large%20foreign%20investment%20flows.