Health and safety with regards to Oil and Gas Operations is regulated on two levels. On the federal level, the relevant laws are Federal Law No. 8 of 1980 (“Labour Law”) and Environmental Law No 24 of 1999. These laws are complemented by decisions from the Ministries of Labour and Social Affairs. The laws and decisions operate by setting standards and imposing obligations of employers and employees. The Labour Laws specifically imposes ongoing obligation which extend beyond the construction of a project, however Labour Law is not applicable to government companies.
On a local Emirate level, the regulatory bodies act as environmental agencies implementing various environmental laws and regulations. In Abu Dhabi the relevant body is the Environmental Agency Abu Dhabi (EAD), in Dubai the Environmental and Public Health Services Sector and in Sharjah the Environment and Protected Areas Authority (EPAA).
Labour law
Are there any labour law provisions with specific relevance to the oil and gas industry (eg, with regard to use of native and foreign personnel)?
[Note: I could not find any labour laws specific to the oil and gas industry
What is the state of collective bargaining/organised labour in the oil and gas industry?
As of 2014, there was no law in the UAE providing for collective bargaining and organised labour in the oil and gas industry. Overall, Art. 112 of the Labour Law prohibits both strikes and trade unions which may be punished by temporary suspension without payment or deportation for international workers.
The Dubai International Financial Centre however has its own rules and its Employment Law (DIFC Law No. 4 of 2005) does not ban strikes.
Environmental protection
Authorisation
What preliminary environmental authorisations are required before commencing oil and gas-related activities?
Federal Law No 24 of 1999 for the Protection and Development of the Environment (“Federal Environmental Law”) provides for certain requirements with regards to gas and oil related activities. For a project to commence, the parties involved must obtain a licence from the Ministry of Environment and Water (Art. 4-7). The obligations imposed by the Federal Environmental Law are ongoing and parties must periodically monitor the environmental impact of their onshore and offshore activities.
Requirements
What environmental protection requirements apply to the operation of oil and gas facilities?
Environmental protection requirements are provided for by the Federal Environment Law and are regulated by the Ministry of Environment and Water (“MEW”). The MEW has the power to delegate its powers to a ‘Competent Authority’ for each emirate. For example, the Environmental Agency of Abu Dhabi is responsible for enforcing environmental laws and regulations within the emirate of Abu Dhabi.
The Federal Environment Law requires permits to be obtained and environmental impact assessments to be undertaken in relation to oil and gas facilities. It also provides a framework governing the disposal of waste and hazardous materials. Unless safety measures are adopted, companies involved in the operation of oil and gas facilities are prohibited from discharging any polluting substance resulting from drilling, exploring, testing of wells or production into the water or land area in the vicinity of those activities. Adequate safety measures would ensure that harm to land and water environments is nullified and would oblige the parties to treat discharged waste and polluting substances. Other requirements include the need to possess a valid International Oil Pollution Prevention Certificate with an accompanying statement of the last location and quantity of unloaded sludge. In relation to the burning of materials, precautions must be taken to ensure the amount of pollutants resulting from the operation of oil and gas facilities remains within permissible limits.
Environmental protection in Abu Dhabi is principally subject to UAE Federal Law No. 24 of 1999 on the Protection and Development of the Environment (the “Environmental Protection Law”). The UAE Federal Environment Agency is tasked with developing, issuing and revising environmental protection standards in coordination with other relevant bodies and with establishing plans for dealing with environmental emergencies.
Environmental regulation is delegated at an emirate level. For example, ADNOC acts as the environmental regulator of the Abu Dhabi oil and gas industry. ADNOC regulates and pursues various targets for health, safety and the environment, which are subject to implementation by its subsidiaries. ADNOC operates codes of practice and a health, safety and environment management system requiring its group companies to develop and implement compatible programmes.
Breach
What are the consequences of failure to observe the relevant environmental regulations and to what extent can operators be held liable for environmental damage?
Penalties for breaching a provision of the Federal Environmental Law include imprisonment and fines depending on severity of the breach. Continuing breaches of provisions relating to the disposal of waste can result in the closure of offending premises for a period of time or the cancellation of licences.
Consequences of failing to conform to emirate level regulations differ. In Abu Dhabi, the Environmental Protection Law provides that any breach of it shall give full liability to any person who intentionally or negligently harms the environment or human health due to a breach of the Environmental Protection Law. The offender would then have an obligation to rectify the damage caused, which can also include the payment of compensation for loss. This loss may be deemed to be any obstruction to the use of the polluted area or any damage to the aesthetic value of the environment.
Taxes and royalties
Taxes
What taxes (direct and indirect) and/or royalties apply to oil and gas activities in your jurisdiction (upstream, midstream and downstream)?
The tax regime at a federal level has not been issued. However, corporate tax regulations have been passed by emirates including Abu Dhabi and Dubai. Although not petroleum specific, these taxes apply to companies “dealing in oil”, as well as “chargeable persons”. In Abu Dhabi, tax rates range from 55% to 85% depending on the product generating the taxable income. The oil and gas industry is therefore one of the limited cases of a corporate tax being levied in the UAE.
The entire fiscal regime applicable to each oil concession is determined by the Supreme Petroleum Council (the “SPC”) upon grant of the concession. Details of each such fiscal regime are not publicly available, but the fiscal regimes typically involve a mixture of royalty and income tax. The SPC is also responsible for overseeing royalty and tax assessment and collection in the Emirate.
Imports and exports
What taxes and duties apply to oil and gas imports and exports?
Under the Gulf Co-operation Council Customs Union Agreement 2003, the UAE applies a common 5% tariff on imported goods. This agreement also provides for a single entry port whereby items imported in the UAE, and which are destined for another member state of the GCC, are taxed only at the first port of entry. The UAE does not levy export duties.
Decommissioning
Regulation
How is the decommissioning of oil and gas facilities regulated?
Although there are few laws relating specifically to decommission of oil and gas facilities, parties must still comply with general requirements relating to pollution and the protection of the environment.
The Abu Dhabi Petroleum Resources Conservation Law outlines obligations relating to ensuring that the petroleum resources have been used to their pull potential prior to decommissioning. Consent of the Supreme Petroleum Council is also required to decommission a project. This involves a party specifying reasons for the decommissioning and the results achieves until the date of the request.
As party to the Kuwait Protocol, within the UAE the operator of an offshore facility in the case of platforms and other sea-bed apparatus and structures is under an obligation to remove the installation in whole or in part to ensure safety of navigation and the interests of fishing. At a federal level, the UAE is under an obligation, pursuant to the Kuwait Protocol, to ensure that the operator has adequate resources to deal with abandonment and decommissioning.
Dispute resolution
Disputes
How are oil and gas disputes typically resolved in your jurisdiction?
There are no compulsory dispute resolution procedures that specifically apply to the oil and gas sector. Any decisions or disputes that affect a particular concession are governed in accordance with the terms of the applicable concession.
Parties have historically chosen international arbitration as the dispute resolution method to adopt into their contracts. These will typically provide for an overseas neutral city, such as London or Paris. Some contracts with ADNOC have called for domestic arbitration in the Abu Dhabi Commercial Conciliation and Arbitration Centre, part of the Abu Dhabi Chamber of Commerce.
Since the UAE has signed the New York Convention, a foreign arbitration award will likely be enforceable in UAE courts.
Anti-corruption measures
Dishonest practices
What regulations and procedures are in place to combat bribery, fraud, collusion and other dishonest practices in the oil and gas sector in your jurisdiction?
As a member of the United Nations Convention on Corruption, the UAE has measures in place to combat corruption. The UAE Federal Penal Code, although not specifically targeting the oil and gas sector, regulates corruption in the state The Penal Code regulates anti-bribery practices, both at government level and in the private sector. It criminalises bribery, or attempted bribery, of both private and public sector employees. Some emirates also have their own specific regulations (for example, the Dubai Human Resources Law also regulates the acceptance of gifts).
The core provisions of the UAE Penal Code are found in Articles 234 to 239:
- Article 234 penalises public servants and employees of international organisations from requesting or accepting benefits to commit or omit an act that they would otherwise not commit or omit.
- Article 237 sanctions persons who promise public servants a benefit in order for that servant to do or omit his duties.