This article surveys significant legal developments in the Middle East in 2023.
2023 will be engraved in the legal history of Israel as the year of the so-called “judicial reform,” as presented and led by the Minister of Justice, Mr. Yariv Liven. While most of the issues addressed by the reform remained unresolved, they prompted social discord and severe discussions over constitutional governance, the rule of law, and democracy in this seventy-five-year-old nation-state.
Shortly after Israel’s thirty-seventh government was established, the Minister of Justice declared a legislative initiative for several judicial reforms aimed at limiting the Supreme Court’s power of judicial review over the Parliament (the Knesset) and the Government. However, tragic developments in the fall of this year have eclipsed the social upheaval supporting these reforms. Therefore, for the time being, judicial reform has become muted while the military situation awaits resolution.
As a first step, the Minister declared his intention to pass the following legislative amendments in one comprehensive package:
First, the package aimed to limit the Court’s power of judicial review of the constitutionality of legislation by: (1) enacting the overriding clause, allowing a simple majority of sixty-one members of the Knesset (out of 120) to override any Court decision that invalidates legislation as unconstitutional; (2) empowering the Knesset to re-legislate invalidated legislation, unless such invalidation was made unanimously by the Court; (3) prohibiting judicial review over Basic Laws; and (4) requiring the judicial invalidation of a law as unconstitutional only if the Court sits in a full panel of fifteen judges and obtain the support of at least eighty percent of them.
Second, the package aimed to change the structure of the Judicial Selection Committee, thereby increasing the influence of political members over professional members. This modification would expand the Committee members from nine to eleven, with seven members appointed by the coalition, one by the opposition, and three justices from the Supreme Court. However, this change would exclude the Israel Bar Association, a professional organization which plays a vital role in the country’s judicial selection process, by excluding its two representatives from the Committee.
Third, the package aimed to abolish the “Reasonableness Doctrine” as one of the bases for judicial review of the Executive Branch.
Fourth, it sought to degrade the legal status of the State General Attorney, making his or her legal recommendations solely advisory rather than binding.
However, due to the scope and magnitude of public reaction in opposition to the reform, the Minister of Justice decided to promote his initiative not as one comprehensive legislative package. Instead, he divided the package into several issues and started with the Reasonableness Doctrine issue. Ultimately, he succeeded in amending the Basic Law provisions regarding the Judiciary, stipulating that the Court may not judicially review governmental actions based on the Reasonableness Doctrine, including decisions concerning the exercise or omission of exercising the governmental authority. Several petitions were filed against this amendment’s constitutionality. In an unprecedented step, the Supreme Court’s Chief Justice decided that a full panel of fifteen members would hear the petitions. The cases were heard recently in September 2023 and a decision is anticipated by mid-January 2024.
On October 3, 2022, the UAE President issued the “Corporate Tax Law.” This ground-breaking legislation establishes the legal framework for the introduction and implementation of federal corporate tax in the UAE, which is set to be effective for financial years beginning on or after June 1, 2023.
The introduction of corporate tax in the UAE marks a pivotal step towards realizing the nation’s strategic objectives, such as reinforcing its reputation as a global business and investment hub and propelling its economic growth. Key aspects of the UAE Corporate Tax Law cover its application to a broad category of entities including UAE-based companies, natural persons (individuals) engaged in business activities in the UAE and non-resident juridical persons (foreign legal entities) with a “Permanent Establishment” in the UAE Juridical persons established in UAE free zones are also subject to corporate taxes. However, entities that meet the criteria to be classified as “Qualifying Free Zone Persons” may benefit from a zero percent corporate tax rate on their Qualifying Income.
The standard tax rate for corporate tax is nine percent, which applies if taxable income exceeds UAE Dirhams 375,000 (approximately US $102,000). However, multinational enterprises with annual global consolidated revenue exceeding 750 million euros (approximately US $794 million) and falling within the scope of pillar two of the Base Erosion and Profit Shifting (BEPS) 2.0 framework issued by the Organization for Economic Cooperation and Development (OECD) will be subject to a different tax rate.
Despite the levy of corporate tax, the UAE remains one of the jurisdictions with the lowest tax rates. Additionally, the absence of personal income tax continues to make the UAE a favored destination.
