The new UAE Companies law that came into force on 1 July 2015 contains a provision titled “Disclosure of company secrets” (article 369). The UAE already has a number of laws that penalise disclosure of trade secrets or impose obligations of confidentiality. This article looks at two questions: 1. what does the new provision add to the existing protection regime? and 2. how is the new provision different from what was in the old UAE Companies law?
What does the new provision add to the existing protection regime?
In addition to what is now provided for in the new Companies law, three different laws provide differing scopes of protection for “trade secrets”:
- The Civil Transactions law imposes an obligation on employees to keep confidential the commercial and industrial secrets of their employers even after the end of their employment contract (articles 905 and 922).
- The UAE Penal Code punishes anyone who holds a secret because of his profession or position and discloses it other than when legally permitted or uses it for his own or another’s benefit without permission (article 379).
- Know-how is protected by the UAE Patent law of 2002 as information or facts of a technical nature resulting from experience obtained in the practice of a profession and capable of being practically applied.
The UAE’s 1984 Companies law, now repealed, also contained protections for company secrets (discussed below).
The new Companies law specifies two circumstances in article 369 that are punishable. The second is the broadest:
“2. the chairman, a board member or an employee who uses or discloses a company secret or intentionally tries to damage the company’s activity”
The language here leaves scope for several possible interpretations and applications. Use of a company secret is mentioned but presumably it should be a use for personal gain, perhaps at the expense of the company. Intentionally damaging the company reads as a separate offence but what kind of acts it was intended to capture is not clear. Perhaps it was intended that the use or disclosure of a secret would only be an offence if it damaged the company but the drafting did not quite express that idea.
By contrast with the second point of article 369, the circumstances described in the first point of article 369 as giving rise to an offence are very specific. It reads as follows:
“1. anyone who takes advantage of data or information that he obtained from the incorporation committee at any stage of incorporation of the company and who is a legal or financial consultant or a subscription director or covering sponsor or the parties participating in the incorporation procedures or any of their representatives.”
What are the elements of the offence? First, it is only the exploitation of the data or the information that we are concerned with, and not its disclosure. On a point of translation: “take advantage of” is my rendering of “istaghalla” which carries a sense of abuse of position that “ista’amala” (“use”) – the word used in the Penal Code – does not. One translation I have seen renders it as “utilize”.
The second element is that we are concerned only with information obtained from the “incorporation committee” at any stage of the company’s incorporation. This expression is not defined in the law and is probably not a reference to article 112’s public joint stock company’s committee of founders and the subgroup of them who will handle incorporation procedures. It probably refers to the group of persons instigating the creation of the company and that group may be different depending on the type of company concerned.
The third element is the persons who are potentially liable. Legal and financial consultants are specified. Although in the UAE there is a clear distinction between lawyers and legal consultants, the use of “mustashareen” here is probably intended to cover both local lawyers and legal consultants. Note they are not limited to the legal or financial consultants advising the incorporation committee – it applies to any consultants who may have obtained incorporation committee information. Next is the subscription director and then the covering sponsor or organiser. Neither of these roles appears to be mentioned in the law other than in this article. Then there are the parties participating in the incorporation process. This would appear to be a reference to the members of the incorporation committee itself. The representatives of any of these categories of persons are also potentially liable.
These new Companies law provisions clearly cover different territory from that covered by the Patent law and the Civil Transactions law. However, it is difficult to see that they have added anything significant to the existing provisions of the Penal Code. Article 379 of the Code punishes anyone who because of his profession or position holds a secret and discloses it or uses it for his benefit or that of another. The Penal Code provision is possibly broader because it covers disclosure and not just use for benefit of oneself or another – not all disclosures would also involve a use for benefit. This is to say that the new Companies law provisions do not impose an express general duty of confidentiality on financial and legal advisers and others involved in the incorporation process. The prohibition is against taking advantage of or exploiting information from the incorporation committee, and is not against disclosing that information. There is a reasonable argument that a legal adviser who, for example, disclosed confidential business information obtained in the process of advising on incorporation of a company to a third party and obtained no benefit from the disclosure him/herself would not have committed an offence under article 369 of the new Companies law, but may have committed an offence under article 379 of the Penal Code.
How is the new provision different from what was in the old UAE Companies law?
The punishment prescribed in article 322 of the old Companies law applies to:
7. any manager or member of the board or member of the monitoring committee or adviser or expert or auditor or any of their assistants or employees and any person engaged to inspect the company who discloses any company secrets obtained by virtue of his work or takes advantage of those secrets to obtain a personal benefit or benefit for another.
On one view, the elements of the offence under the old Companies law are clearer than those of the new provisions. The old provisions are also broader in their scope – there is no limitation to information obtained from the incorporation committee. Both disclosure and use for benefit are covered and the list of persons liable is broader.
There are two possible explanations for what we see in the new Companies law provision:
- The intention was to pull back the scope of protection in the Companies law and rely more on other parts of the protection regime such as the Penal Code, or
- The redrafting of the law has unintentionally limited the scope of protection afforded by the Companies law. In any case, the relevant UAE laws, when taken together, still offer wide protection for trade secrets.
This article was first published in The Oath (The Middle East Law Journal for Corporates).