Year in Review - United Arab Emirates Law in 2016

Continuing companies law developments: In 2016, we saw a range of measures introduced under the Commercial Companies Law 2015 (Federal Law No.2 of 2015). The Cabinet extended the transitional period to 30 June 2017 for companies to adjust their position to comply with the law and Ministry of Economy Decree No. 272/2016 clarified and enhanced rules applicable to limited liability companies (including relating to the restriction on financial assistance), among other measures. Read more…

DIFC route to easier enforcement of foreign court judgments in Dubai? In a judgment published in February, the DIFC Court of Appeal opened up the possibility that the DIFC Courts may be used as a means to enforce foreign court money judgments onshore in Dubai, even when the debtor has no nexus to the DIFC. The DIFC Court of Appeal overturned the decision of the Court of First Instance in DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC (CFI-043-2014, CA 007/2015). Read more

New Tribunal established: In June, a new Judicial Tribunal for the Dubai Courts and the DIFC Courts was established by Dubai Decree No. 19 of 2016. The purpose of the Tribunal is to resolve conflicts of jurisdiction and conflicts of judgments between the DIFC Courts and the Dubai Courts, on application by a party to a dispute or the Dubai Attorney General. The Tribunal was established following the judgment in DNB Bank ASA v (1) Gulf Eyadah Corporation (2) Gulf Navigation Holding PJSC (CFI-043-2014, CA 007/2015), which illustrated the degree of overlap in the jurisdiction of the two courts as regards the ratification of foreign court judgments and arbitral awards. This is a new initiative and it remains to be seen how the Tribunal will operate in practice. Read more…

Regulatory changes for publicly listed companies: The Securities and Commodities Authority (SCA) published a range of instruments relating to the regulation of public joint stock companies, including:

In February, SCA Circular No.88 of 2016 clarified the application of the Commercial Companies Law 2015 to PJSCs and published a template Articles of Association which PJSCs are required to use.

In May, Decree No. (7 R.M.) of 2016 concerning Standards of Institutional Discipline and Governance of Public Shareholding Companies came into force. The new rules enhance CCL governance rules for listed PJSCs, addressing some key World Bank recommendations. Key rules address a range of board of director related issues, investor relations, related parties and women on boards. Previous corporate governance rules for listed companies issued in 2009 are repealed.

In July, Decision No. 11 of 2016 Concerning the Regulation of offering and issuing shares in Public Joint Stock Companies set out revised rules for UAE and foreign public joint stock companies wishing to list shares in the UAE. Read more…

DIFC Court of Appeal judgment in mis-selling of investments case: In March 2016, the DIFC Court of Appeal dismissed appeals by Bank Sarasin and Sarasin-Alpen against the first instance judgment in Rafed Al Khorafi v Bank Sarasin-Alpen (ME) Ltd (CA 003/2015, CFI-026-2009). The DIFC Court of Appeal held that the banks were liable for mis-selling investments, upholding first instance findings including as to breach of Dubai Financial Services Authority’s Conduct of Business Rules by Bank Sarasin-Alpen (a DFSA regulated entity) and breach of financial services prohibition in the Regulatory Law 2004 by Bank Sarasin (a non-DFSA regulated entity). Read more…

ADGM Courts sign Memoranda of Understanding regarding domestic enforcement: The Abu Dhabi Global Market (ADGM) Courts have signed two memoranda of understanding to facilitate the reciprocal enforcement of ADGM Court judgments and arbitral awards within the UAE with Abu Dhabi and the Federal courts (relevant for some other Emirates in the UAE). An MoU was signed with the Abu Dhabi Courts in April, and with the United Arab Emirates Ministry of Justice in May 2016. Read more… There are currently no MoUs in place which address enforcement issues as between the ADGM Courts and the Dubai Courts or the DIFC Courts.

DIFC Court judgment enforced in Australia: In March, a DIFC Court judgment was recognised and enforced outside the Middle East region for the first time, by the Supreme Court of New South Wales in Legatum Limited v Arif Salim (CFI 027/2014). Read more…

Competition regime enhanced: In August, two new competition-related regulations came into force. Cabinet Decisions Nos. 13 and 22 of 2016 were issued by the Cabinet under the UAE Competition Law (Federal Law No. 4 of 2012). The regulations set out the market share thresholds at which restrictions on anti-competitive agreements, abuse of a dominant position and economic concentrations are triggered, and a standard definition of small and medium-size enterprises (SMEs). As a result, it is now possible to analyse whether the regime applies to a transaction or activity. Read more…

New bankruptcy and restructuring law: In December, a new Federal bankruptcy law, Federal Decree Law No. 9 of 2016, came into force. It replaced the existing court-led bankruptcy and corporate rescue procedures set out in Chapter 5 of the Commercial Transactions Law (Federal Law No. (18) of 1993) with effect on 29 December 2016. It introduces modernised procedures, aspects of which draw on international “best practice”. We have issued the first in a series of notes on the Bankruptcy Law, in which we provide an overview of the main features of the law. Read more…

Year to come - United Arab Emirates Law in 2017

Bankruptcy Law developments: 2017 may see companies in the UAE using the modernised preventive composition and bankruptcy procedures for the first time. The new Financial Restructuring Committee is expected to be established in early 2017. Whether the UAE will take measures to further develop structural support for the new insolvency framework – for example with measures to support the courts in their enhanced role and to cultivate a body of insolvency practitioners – will be eagerly monitored by the market. The Bankruptcy Law should tick a lot of boxes when considering how to assess the UAE for the purposes of the World Bank “Doing Business” insolvency rankings. Looking ahead, the UAE may see its rankings rise. There is some discussion in the market as to whether the UAE may look to introduce bespoke bankruptcy regimes for individuals and/or for banks and financial institutions, but there are no concrete proposals at this stage.SCA regulations anticipated in 2017: Further regulations may cover areas subject to consultation in the last quarter of 2016, including on the promotion of financial products and the arranging of financial services (which may introduce heavier regulation in this area) Read more… and draft merger and acquisitions regulation for PJSCs.

UAE netting law: We understand that a Federal netting law may be developed in 2017, which may expressly permit provisions of a netting agreement to be enforceable in accordance with their terms, including against an insolvent party. There is no official consultation on the draft law and the legislative timetable is not known.

DIFC financial collateral law: We may see financial collateral legislation enacted in the DIFC following a consultation in 2016. This may create a more creditor-friendly legal regime relating to cash and securities collateral, under both security interest and title transfer structures within the DIFC and enhance the existing provisions on collateral arrangements. The legislative timetable is not known.

Preparations to introduce VAT: The UAE is expected to enact a new law on Value Added Tax (VAT) in 2017. There is no official consultation on the draft law and the legislative timetable is not known. It is reported that VAT will be levied on goods and services, subject to certain exemptions, from January 2018. A UAE Ministry of Finance spokesperson has stated that companies in the UAE with annual revenues of more than $1 million (AED3.75 million) will be obliged to register for the new VAT system in January 2018, as part of a phased implementation. A new Federal Tax Authority (FTA) to collect data, information and statistics related to federal taxes was established in October 2016 and further measures to develop supporting infrastructure for the new law may be taken. This follows the agreement between GCC countries to introduce VAT at an initial rate of five per cent concluded in May 2015.