International: Abraham Accords – UAE Boycott of Israel repealed but no change in US Anti-Boycott Laws

In brief

On 29 August 2020, the United Arab Emirates (UAE) Government’s Emirates New Agency (Wakalat Anba’a al Emarat, or 'WAM') publicly announced that H.H. Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE, issued Federal Decree Law No. 4 of 2020 (the UAE Israeli Boycott Repeal Law), abolishing Federal Decree Law No. 15 of 1972 Concerning the Arab League Boycott of Israel (the UAE Israeli Boycott Law).


The UAE Israeli Boycott Repeal Law follows the announcement of the historic peace agreement between the UAE and Israel (known as the UAE-Israel Abraham Accords – Treaty of Peace, Diplomatic Relations and Full Normalization between the UAE and the State of Israel) on 13 August 2020, issued jointly by H.H. Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu. Officially signed on 15 September 2020 , the UAE-Israel Abraham Accords (available in full here) outlines a number of areas of intended cooperation between the two states, and the establishment of full diplomatic ties in exchange for Israel's suspension of further annexation of Palestinian territories, under Article 5 and supplemented in its Annex.  This includes: (i) finance and investment; (ii) civil aviation; (iii) visas and consular services; (iv) innovation, trade and economic relations; (v) healthcare; (vi) science, technology and peaceful uses of outer-space; (vii) tourism, culture and sport; (viii) energy; (ix) environment; (x) education; (xi) maritime arrangements; (xii) telecommunications and post; (xiii) agriculture and food security; (xiv) water; and (xv) legal cooperation.

The UAE Israeli Boycott Repeal Law, which was published in a supplement to UAE Federal Official Gazette No. 685 dated 27 August 2020 (but circulated publicly by the UAE Ministry of Justice on 15 September 2020 – the date of the signing of the UAE-Israel Abraham Accords), has a specific effective legal start date of 16 August 2020. The UAE Israeli Boycott Repeal Law allows individuals and companies in the UAE to now enter into agreements with Israeli firms, citizens and residents as part of commercial or financial operations or dealings. It is now permissible to enter, exchange or possess Israeli goods and products of all kinds and trade in them in the UAE, which was previously prohibited under the UAE Israeli Boycott Law.

Notwithstanding these developments, as of now, there have been no changes to US anti-boycott laws with respect to the UAE. In short, if a particular boycott request would have been problematic or reportable before the issuance of the UAE Israeli Boycott Repeal Law, it remains problematic or reportable today. 

Additionally, on 11 September 2020, the Kingdom of Bahrain (Bahrain – who along with the UAE is a fellow member of the Gulf Cooperation Council (GCC)) had also announced its decision to establish full diplomatic relations with Israel through the Bahrain News Agency (or BNA). On the same day as the signing of the UAE-Israel Abraham Accords, Bahrain and Israel also entered into a separate historic peace agreement (known as the Bahrain-Israel Abraham Accords – Declaration of Peace, Cooperation and Constructive Diplomatic and Friendly Relations) covering the same areas of intended cooperation (available in full here).

Overview of Israeli Boycott Law

Formed in March 1945, the Arab League has issued boycott resolutions against Israel ever since Israel’s declaration of independence in 1948 (and even before this in 1946, against Zionist produced goods under Arab League Council Resolution 16). On 19 May 1951, the Arab League Council passed Resolution 357, establishing the Central Boycott Office (CBO) in Damascus, Syria, with branch offices to be established in each Arab League Member State.

On 11 December 1954 the Arab League Council passed Resolution 849, approving the Unified Law on the Boycott of Israel (Arab League Council Resolution 849). Arab League Council Resolution 849 contained what is often referred to as the 'secondary' and 'tertiary' elements of the Israeli Boycott in providing new recommendations prohibiting entities and individuals from or based in Arab League Member States from also dealing (i) with agencies of persons working for Israel, and (ii) with foreign companies and organizations with interests, agencies, or branches in Israel.

Following the foundation and independence of the UAE on 2 December, 1971, the UAE became the eighteenth Member State of the Arab League on the same date. By September 1972, the UAE issued the UAE Israeli Boycott Law which included the 'secondary' and 'tertiary' elements mentioned above (in-line with Arab League Council Resolution 849). Following an announcement on 30 September 1994 by the GCC to no longer enforce the 'secondary' and 'tertiary' elements of the Israeli Boycott (which came in the wake of developments in Israeli and Palestinian relations expressed through the Oslo Accords), the UAE Cabinet issued Resolution 462/17M in 1995 (1995 Cabinet Resolution), reducing the scope of its Israel Boycott Law to only its 'primary' elements. Under the 'primary' elements of the UAE Israeli Boycott Law, it remained a criminal offence to deal (i) with or in goods or services from Israel or of Israeli origin, and (ii) with the State of Israel and its citizens. Although the 1995 Cabinet Resolution did not formally amend the UAE Israeli Boycott Law itself, it demonstrated the UAE Government's official position on the matter.

Following the new UAE Israeli Boycott Repeal Law, the UAE Israeli Boycott Law has been revoked in its entirety, paving the way for economic, political and cultural cooperation between the UAE and Israel across an extensive range of sectors and issues as mentioned above.

Overview of US Anti-Boycott Law

US anti-boycott laws prohibit or penalize US companies and in some instances their non-US subsidiaries from participating in or cooperating with foreign boycotts against countries friendly to the United States, including Israel. In addition to prohibiting certain types of boycott-related actions or agreements, these laws also require companies to report requests to participate in or cooperate with such boycotts to the US Government. US anti-boycott laws consist of two legal regimes, including regulations administered by the US Department of Commerce through Part 760 of the Export Administration Regulations (Commerce Regulations), as well as Section 999 of the Internal Revenue Code as interpreted by the US Treasury Department (Treasury Rules). The Commerce Regulations and Treasury Rules vary in their jurisdictional reach, treatment of certain boycott requests, and penalties imposed.

Violations of the Commerce Regulations are punishable by civil penalties (fines of $305,292 or an amount that is twice of the value of the transaction at issue, whichever is greater, and/or the denial of export privileges) and criminal fines of up to $1,000,000 and/or imprisonment of up to 20 years for willful violations. By contrast, the Treasury Rules do not “prohibit” boycott-related activities or agreements and do not threaten civil and criminal penalties, but instead subject US taxpayers to potentially significant tax penalties if they or any of their controlled group members enter into agreements inconsistent with the Treasury Rules.

Key takeaways

The historic UAE-Israel Abraham Accords aim to further advance peace in the Middle East and to open up the region in a number of ways, including in wider trade and investment and technological innovation. This development is also a step towards potential diplomatic breakthroughs between Israel and other Arab nations in the future. Currently, the only Arab states with full diplomatic relations are Jordan and Egypt (with the UAE and now Bahrain to follow), with a few other Gulf nations, including Qatar and Oman, having ties with Israel.

On 1 September 2020, it was announced on the Emirates News Agency that H.E. Abdulhamid Saeed Alahmadi, Governor of the UAE Central Bank, and Ronen Peretz, Director-General of the Israeli Prime Minister's Office, signed a Memorandum of Understanding, for future cooperation in the banking and financial services, and to form working groups and bilateral committees to facilitate banking between the UAE and Israel. Key institutions in the Israeli banking sector have already made announcements of forthcoming delegations to the UAE to explore opportunities, and public announcements have already been made in terms of cooperation agreements in the education, maritime, aviation, space, healthcare, asset management, and telecommunications sectors. The UAE and Israel had established direct telephone links on the day when the UAE Israeli Boycott Repeal Law took effect. It has also been announced that the state-run Abu Dhabi Investment Office will open its first office outside the UAE in Tel Aviv.

The new UAE Israeli Boycott Repeal Law has far-reaching political and economic implications, particularly for companies with multiple operations and nationalities across the Gulf including in Israel. Notwithstanding the new UAE Israeli Boycott Repeal Law, companies will still need to consider carefully their position on doing business with Israel in light of the continuing prohibitions that exist in other Gulf countries on doing business or otherwise engaging with Israeli persons. These prohibitions may continue to apply to the citizens of both Arab League and non-Arab League Member States that continue to adhere to either the Arab League Boycott of Israel or separate independent Israeli boycott legislation, wherever they reside.

However, there has been no change to US anti-boycott laws thus far. As such, boycott requests that were prohibited, penalizable, or reportable under the Commerce Regulations or Treasury Rules before the UAE-Israel Abraham Accords remain so today. In other words, the status of the application of US anti-boycott laws regarding the UAE remains the same as it was before the UAE-Israel Abraham Accords. While these developments may eventually result in changes to the Commerce Regulations and Treasury Rules to reflect the UAE's repeal of the boycott, this has not happened yet, and it could be some time before any changes occur. 

For further information, please reach out to one of the lawyers above or your usual Baker McKenzie contact.

*****************************

This client alert was issued by BM Habib Al Mulla, a member firm of Baker McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner or equivalent in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

Contact Information

Copyright © 2023 Baker & McKenzie. All rights reserved. Ownership: This documentation and content (Content) is a proprietary resource owned exclusively by Baker McKenzie (meaning Baker & McKenzie International and its member firms). The Content is protected under international copyright conventions. Use of this Content does not of itself create a contractual relationship, nor any attorney/client relationship, between Baker McKenzie and any person. Non-reliance and exclusion: All Content is for informational purposes only and may not reflect the most current legal and regulatory developments. All summaries of the laws, regulations and practice are subject to change. The Content is not offered as legal or professional advice for any specific matter. It is not intended to be a substitute for reference to (and compliance with) the detailed provisions of applicable laws, rules, regulations or forms. Legal advice should always be sought before taking any action or refraining from taking any action based on any Content. Baker McKenzie and the editors and the contributing authors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The Content may contain links to external websites and external websites may link to the Content. Baker McKenzie is not responsible for the content or operation of any such external sites and disclaims all liability, howsoever occurring, in respect of the content or operation of any such external websites. Attorney Advertising: This Content may qualify as “Attorney Advertising” requiring notice in some jurisdictions. To the extent that this Content may qualify as Attorney Advertising, PRIOR RESULTS DO NOT GUARANTEE A SIMILAR OUTCOME. Reproduction: Reproduction of reasonable portions of the Content is permitted provided that (i) such reproductions are made available free of charge and for non-commercial purposes, (ii) such reproductions are properly attributed to Baker McKenzie, (iii) the portion of the Content being reproduced is not altered or made available in a manner that modifies the Content or presents the Content being reproduced in a false light and (iv) notice is made to the disclaimers included on the Content. The permission to re-copy does not allow for incorporation of any substantial portion of the Content in any work or publication, whether in hard copy, electronic or any other form or for commercial purposes.