A new law which is designed to enhance investors' trust in Dubai may also have a welcome effect in protecting employees from certain forms of whistleblowing. This article considers the existing law which must be taken into account when someone "blows the whistle", as well as the implications of the new Financial Crime Law. Employers will want to take this into account when drafting whistleblowing policies.
Whistleblowing, although not defined in UAE law, is generally considered to be the disclosure, by either a current or ex-employee, of information about the employer's conduct, either within the company itself (for example, to a hotline), or to a third party, such as the regulators and or authorities.
Unlike in many other jurisdictions, there has until recently, been no statutory protection for whistleblowers in the UAE or DIFC law.
This appears to have changed (in part) in Dubai with the passing of the Dubai Law No. 4 of 2016 on Financial Crimes (the Financial Crime Law), which for the first time includes protections for those that report crimes to the newly established Dubai Centre for Economic Security.
Current Protection under UAE law?
The general advice usually given to those that intend to whistleblow in the UAE is they should act with caution – whistleblowing is fraught with risks, primarily because there are no explicit protections under the law.
In contrast, by way of example, in the UK, under the Public Interest Disclosure Act 1998, employees who make a disclosure about unlawful activity are protected from prosecution and from termination of their employment by reason of that disclosure.
This is not so in the UAE.
While there is an obligation to report criminal activity, as set out at Article 274 of the UAE Penal Code, in practice, whistleblowing is rare. In the event a whistleblower discloses confidential information about his employer to any regulatory authorities or even to the Police, not only may he be in breach of his employment contract but he may also be in breach of the law.
The whistleblowing could be considered a criminal offence for a number of reasons. Article 379 of the UAE Penal Code provides that it is an offence for an individual, who is entrusted with secrets through his employment, subsequently to disclose those secrets.
Such an individual could be liable for a penalty of a minimum of 1 year imprisonment and/or a fine exceeding AED 20,000. Of course, if the disclosure is required and permitted by law, then this will be a defence that the whistleblower can use.
But if the whistleblower has disclosed confidential information (which it was not entitled to), the company may have an action against him personally. This could result in police investigations and criminal proceedings against the whistleblower.
In addition to the criminal liability, the Company may view any disclosure as a breach of the Civil Code, which may result in the Company filing a civil suit against the whistleblower for damages. Article 905 of the Civil Code provides:
"the employee must keep the industrial or trade secrets of the employer, including after the termination of the contract, as required by the agreement or by custom."
Naturally, these obligations are often supplemented by provisions and restrictions regarding the company's confidential information contained in the relevant individuals.
There is also the added concern for would-be whistleblowers that they may be accused of committing crimes connected with defamation. Defamation is a criminal offence under the UAE Penal Code, with severe penalties for bringing individuals or companies into dishonour and disrepute. The fact that the allegation may be true is not a defence.
However, the new Financial Crime Law appears to open the door for changes to this state of affairs.
The principal purpose of the law is to establish the Dubai Centre of Economic Security.
The Centre has been set up to combat financial crimes including "corruption, fraud, bribery, embezzlement, destruction of public property, forgery, counterfeiting, money laundering, terrorism or illegal organizations financing or other crimes that may be committed in the entities" within the Emirate of Dubai.
As one of the fastest developing jurisdictions in the Middle East, the UAE and its authorities (and especially those in Dubai) have long been at the forefront in recognising the detrimental effect of bribery and corruption (and other financial crimes) on the local economy and setting up bodies to tackle such crimes in the region.
It appears that they have now begun to realise that an important way to target and stamp out the crimes is to facilitate their disclosure by employees (and others).
Under Article 19, the Financial Crime Law provides for "protection for the reporter". The law stipulates that the reporter's freedom, security and protection shall be guaranteed, and that no legal or disciplinary action may be taken against the reporter unless the report is false.
This law is new, and its application has not been tested. The Centre has not yet been established.
Questions may arise as to whether whistleblowing is only protected if it is made to the Centre or to other bodies. Under the UAE Penal Code, crimes should also be reported to the Police and the Public Prosecutor. If a crime is reported to the Police, do the protections apply? On a strict interpretation of the law, we say arguably not. What about crimes that are perpetrated outside Dubai but within the UAE?
Notwithstanding these questions, the new law and these provisions are a welcome development. However, until we are able to see its application by the authorities, we would still advise whistleblowers to act with caution in Dubai and elsewhere in the UAE.