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The new key laws introduced in the UAE to support businesses

Dubai is in the final countdown for the preparation of the long-awaited Expo 2020, which is set to open a year from now, in October. This is a key event set to take place in Dubai and will be a major focal point of the agenda of most corporations doing business in the emirate or looking to do business in it.

The emirate remains a main attraction for foreign investments especially the ones looking to benefit from its location, business, and legal environment and world-class infrastructure, to access the region. This was further validated by the UAE’s ranking in the ease of doing business, where it was positioned 11th, according to the World Bank annual ratings in 2019. This accomplishment is a reflection of the government’s ongoing work to promote a business environment that is diverse and sustainable.

A number of efforts have been made to diversify away from dependence on oil, creating a very strong services sector – one that fosters a competitive business environment. A major aspect of such an environment is a supportive and effective legal framework for businesses, on par with international standards, hence the recent changes and additions in UAE’s regulatory and corporate sector.

Among major changes that are expected to push the growth and progress of the local economy in Dubai are the implementation of UAE Federal Law No 19 of 2018 on foreign direct investment (the “FDI Law”) and the subsequent positive list of activities issued by the UAE Cabinet.

The FDI Law now allows up to 100% foreign ownership in more than 122 economic activities across 13 sectors including, transport and storage, agriculture, space, manufacturing industry, renewable energy, hospitality and food services, among others. These sectors will offer new economic opportunities for international investors to explore in the UAE, particularly for projects involving e-commerce logistics, research laboratories, advancement in biotechnology, logistics and supply chain, production of solar panels, hybrid powerplants and green technology.

The refreshed list of privileges for companies established under the new FDI Law are extensive and includes treatment as local companies, as well as the removal of restrictions on repatriation of profits and any proceeds from liquidation or sale of a business. Employees of FDI companies can now transfer their salaries, indemnities and entitlements outside the UAE. In addition, FDI companies are guaranteed the confidentiality of technical, economic, financial information, including investment initiatives. There are now no restrictions on the sale of a business, admission of new shareholders or change of legal form and structure.

In addition to the FDI Law, the UAE published two major laws in 2016 that will have a direct impact on the creation of a comprehensive legal and regulatory regime for the operations of corporations. These include the UAE Federal Law No. 9 of 2016 on bankruptcy (the “Bankruptcy Law”) and UAE Federal Law No. 20 of 2016 on the pledge of movable assets as a guarantee for debts (the “Law on Pledge of Movable Assets”).

The Bankruptcy Law deals mainly with the various structures for bankruptcy and liquidation of assets for distressed corporations, including restructuring and composition procedures. Meanwhile, the Law on Pledge of Movable Assets allows the pledge of certain movable assets (such as bank accounts, stocks, trade documents, equipment etc…) by corporations and the establishment of a special register to handle the registration of such pledges in favor of third parties. This law, in particular, is of extreme importance as it gives a lot of flexibility to corporations and allows them to secure proper funds while guaranteeing the financing parties’ rights.

Further and in November 2019, the UAE Cabinet passed a new Federal law No 19 of 2019 on Insolvency of Natural Persons that applies to debtors that are not subject to the Bankruptcy Law. This new law applies to individuals who are in default of payment or facing difficulties in meeting their financial obligations. it is expected that the Insolvency Law will increase transparency in the dealings between financial institutions and individuals and address situations of defaults in a way that will enable all parties to safeguard their rights.

All of the above laws combined have created an overall framework to regulate the environment under which companies in the UAE are operating and have considerably elevated the maturity and complexity of commercial transactions, as well as prospects of new and innovative investments. This will also complement the efforts that are being pursued on other fronts, such as the development of world-class regulations for the protection of intellectual property rights, fighting cybercrime, promoting fintech initiatives and reinforcing the partnership between free zones and local authorities.

There is no doubt that the creation of such a strong legal framework for commercial companies will positively impact the growth of foreign investments in Dubai, helping create an optimal environment that enables the growth of the local economy and supports the diversification of its main contributing sectors.

The New DIFC Intellectual Property Law

The Prime Minister of UAE His Royal Highness Shaikh Mohamed Bin Rashid Al-Maktoum issued law number 4/2019 for Dubai International Financial Center (DIFC) on November 21, 2019, “DIFC IP LAW”.

With the help of this new law, we believe the UAE, and Dubai in particular, has advanced one step more in progressing its regional position as a hub host for e-commerce, e-governance services, knowledge-based economy and strengthen innovation environment. Dubai has been the center point in the Middle East to launch many entities that has later becomes international reputation in e-commerce, mobile applications and online web services providers. The very good examples of “Souq.com” marketplace, acquired by Amazon, and “Maktoob” acquired by Yahoo Inc, “Careem” in process of acquisition by Uber, were all established in the UAE. Because of this unique position, Dubai was the ideal place to hold many routine IP events and meetings for international organisations to promote, discuss and advocate for protection of IP rights and discuss key challenges in this domain within our region.

Dubai International Financial Center (DIFC), or unofficially known as the Wall street of Middle East, was established to be the first district that follows common law system in a civil law country. This area continues to be among the most favorable locations to set up entities of foreign investments, international firms, financial institutes and other western companies that seek presence in the Middle East. As Intellectual property (IP) is one of the key areas of law that is evolving rapidly in UAE, both government and private sectors have begun, in the last few years, paying more attention to applicable laws and regulations that assist them to create, protect, own and enforce their exclusivity on intangible assets.

The majority of IP rights in UAE are regulated by Federal laws that were enacted between 1992 and 2002 and were followed by several amendments. To enhance the protection of IP rights within DIFC and keep the speed with international standards of IP laws, the new DIFC IP law introduces clarity on ambiguous or keys issues that are deregulated in the UAE. In fact, calls were made by professional experts in IP during the past few years to pass a special, developed and enhanced IP piece of regulation in the DIFC that can set out the best practice rules, provide guidance and advanced protection and clarity on IP related inquiries. Hence, this new law does not come as a surprise to those who have been following the advancement of local regulations in the UAE, rather, it reads as a promising step to expand in the protection of IP rights in the region and sets out a good precedent for legislators to regulate, or amend existing laws, on a wider level.

The new DIFC IP law introduces a new era in IP rights protection within our region. It establishes a well-regarded reference to head for a more internationally satisfying IP legal landscape. Whilst we should wait and see the enforcement of this new law before local courts, we anticipate key interesting provisions to be introduced to regulate classical IP rights models, i.e. patents, trade secrets, industrial designs, trademarks, copyrights and trade names. For instance, this law should read in harmony with existing federal laws that are applicable in the UAE and does not determine any new and/or alternative registration systems. The law does not establish or introduce any registration systems for IP rights within DIFC nor will replace or overlap with existing registrations acquired from relevant offices at the UAE Ministry of Economy. On the other hand, it brings an explicit recognition of some new doctrines and principles in the IP field, such as fair use of trademarks and patents, work for hire, parody, classification of economic rights associated with copyrights, factors and advanced measures to determine “well known” trademarks, trade secrets violations and reverse engineering.

Collection Societies is a very interesting topic to see regulated for the first time in an internal law and the new DIFC IP law provides an excellent opportunity for Collection Societies entities to plan and establish its presence in the DIFC. This will help to start the process of enforcement of those delegated copyrights to Collection Societies, bringing this area to a real presence within the UAE. To those who followed this topic, it has been subject to serious debates, discussions and advocacy efforts in the past 10 years, without any material progress. In light of this new law, the Collection Societies are invited to expand their presence and come to the DIFC to use this new legislative platform for its activities in the region. Article 41 of the new law sets out some clarity on performance of Collection Societies and restrictions of some activities, such as applying discriminatory licensing or exploitation to copyrighted work of art. Nevertheless, Collection Societies should know that the DIFC court orders are enforceable within the UAE mainland and, in theory, can be expanded to reach other GCC and/or Arab states, based on applicable treaties and conventions.

Sanctions and penalties in this law are also an important chapter, noting promising ranges of fines that are to be imposed, which seem to be more effective in assisting enforcement actions. With introducing a new Commissioner of IP role, we believe this mechanism will be an indication to see how this new DIFC IP law will be enforced.

A more detailed review for this new law will be released by IP practitioners which will help to add further clarity and explanation to stakeholders, i.e. Intellectual Property rights owners and counsels.

Wave of Transformation in Saudi Arabia

Over the past two years, citizens of the Kingdom of Saudi Arabia (KSA) have witnessed huge legal reforms related to women’s rights. The most anticipated and exiting amendments were recently announced pursuant to Royal Decree number (M/34) dated 27/11/1440 corresponding to 30/07/2019. This decree constituted the amendment of four different laws, granting men and women equal civil rights, as well as freedom of independent movement, while ensuring equality for women in the work place.

The first amendment was made to the travel documents law. The change allows women to now issue, renew, and receive their own passports, instead of restricting this right to male citizens. Prior to this amendment, passports of female citizens used to be issued only after a request submitted by their male guardians, following which, only the guardian was authorised to receive it. In addition, a Saudi woman was required to carry a travel permit issued by her male guardian, through the Saudi immigration directorate, in order to travel outside the country. Following the recent reforms, these restrictions have been lifted, allowing Saudi women over the age of 21 to request the issuance of their own passports and travel outside of KSA without needing permissions from their male legal guardians. Another very important right given to Saudi women, as a result of the Decree, is the right for a divorced or widowed mother, holding the custody of her children, to have the authority to issue their passports and travel permissions.

The recent reforms also include amendments to the Saudi labour law, especially with regards to women’s rights. It began by changing the definition of an ‘employee’, stipulated in article two of the law, to state that ‘an employee is any natural person – male or female – who works for an employer…..’ This amendment is a huge recognition of Saudi women’s role and contribution at the workplace.

The amendments to the labour law also state that work is a right of every citizen, without any discrimination based on sex, disability, age, etc. In addition, it restricts an employer’s right to terminate a female employee’s contract in case of absence resulting from her pregnancy or any illness related thereto, as long as such absence does not exceed 180 days a year, whether consecutive or intermitted. This restriction is expected to safeguard working moms’ interests and rights.

The new Saudi labour law demonstrates perfect equality between the two genders at the workplace, in addition to accommodating special provisions that Saudi women may require in certain situations. The recent changes bring Saudi women closer to equality and recognise their importance to the government and economy as a productive, well-respected member of the society. Witnessing such amendments fills every Saudi women’s heart with pride and a sense of fulfilment. It has been a great year for women in Saudi Arabia and I am proud to be one.

A New Bankruptcy Regime for Oman

Prior to the recent passing of the Omani Royal Decree No 53/2019 (the “Bankruptcy Law”), Oman law contained limited legislation governing the area of bankruptcy. The Commercial Law issued by the Royal Decree No 55/1990 and the Commercial Companies Law issued by the Royal Decree No 4/1974 and their related amendments continued to provide the framework for the bankruptcy of traders and liquidation of insolvent companies, until the passing of this new Bankruptcy Law.

This new law, which will come into effect from July 1st 2020, sees the formation of new progressive rules and regulations. These provisions will apply to traders with the aim of improving the methods and measures that are to be taken following a bankruptcy.

The key three provisions that have been introduced include the restructuring procedure, preventive composition, and bankruptcy.

1. Restructuring

A significant new provision introduced by the Bankruptcy Law includes the concept of restructuring. This is a brand new mechanism proposed for the traders in financial difficulties. Restructuring involves proceedings that may assist the trader debtor to overcome a financial and administrative disorder, by way of settling the debtor’s debts via a restructuring plan. This is overseen by a restructuring committee, which is formed of experts that are registered on the Roll and are defined to include a sufficient number of persons, offices, and companies specalised in the restructuring field. The experts will be sought by the Competent Department at the Ministry of Commerce & Industry and required to examine petitions for restructuring and the handling of the petitioner’s assets.

This method is aimed to help prevent traders from going into liquidation, by way of creating a settlement of the traders’ debts with its creditors. The procedure enforces strict and fast deadlines and requirements for the petition to be accepted and can only be submitted where it is found that the debtor has not committed any act of fraud and has practiced the business continuously during the two years before the filing of the petition.

2. Preventive Composition

The second method includes Preventive Composition, whereby the trade debtor may apply for in situations when there is a disruption in the debtor’s financial situation, which is likely to lead into an interruption of the payment of the debtor’s debts. This method can be sought with the aim to achieve a settlement with creditors to avoid bankruptcy. Unlike the method of bankruptcy, creditors are unable to apply for a petition of Preventive Composition.

During the time of Preventive Composition, the trader can continue to administer the property and undertake acts in the everyday course of business. A composition trustee will be appointed by the court, who must help oversee the Preventive Composition process, such as the gathering of creditors and the publishing of the summary.

Where a Preventive Composition application succeeds, the Judge will require a majority vote of consent by the creditors, in which their approval must accumulate to two-third of the verified debts. For a secured creditor, they may not vote unless they give up their rights as secured creditors. In situations where the company has issued bonds or sukuks and the outstanding amount of bonds exceeds more than one-third of the total outstanding debts, the composition will require further approval from the general assembly of the holders of the bonds or sukuks.

3. Bankruptcy

The third method includes filing for bankruptcy. Any trader who may have stopped payment of his commercial debts due to the interruption of his commercial business may submit a petition in bankruptcy. For a petition to be submitted, it must be made within fifteen days from the date of cessation of payments and must include the reasons for the cessation and the appropriate documents, including statements of property and expenses. The Court may also prompt the decision of bankruptcy for a trader. Where a submission for bankruptcy is made, the trader company requires the approval of the majority of its shareholders.

Bankruptcy claims are examined by the Court, who will in turn, take precautionary measures against assets of the trader debtors to preserve the assets of the trader. The Court will also appoint a liquidator, who will be the official receiver to oversee the insolvency proceedings. They will be in control of overseeing the management of assets of the debtor trader.

The liquidator will also be in charge of publishing a summary of settlement in the Commercial Register and the invitation of creditors. They must ensure that the bankrupt person cannot manage or dispose of any property, pay any debts or retrieve any amounts that are owed to him.

4. Penalties

With the new Law, there is now enforcement of penalties for rejected petitions by the Court. In circumstances where the Court believes the trader has deliberately claimed bankruptcy, the petitioner can be found sentenced to a financial penalty. The Law also enforces an imprisonment sentence, where they are found acting in bad faith, through methods of concealment, inducement or neglects to include a creditor.

Conclusion…

The new Bankruptcy Law continues to promote investment in Oman, by helping to ensure transparency to both foreign and local investors. The New law will impact the working of companies by providing a base to seek a remedy in circumstances of bankruptcy, helping to provide more suitable conditions for companies to grow. The new Law also enables debtors the opportunity to rehabilitate by being given the chance to pay all due amounts and expenses owed to creditors.

UAE Tederal Tax Authority extends the Excise Tax

On the 1st of October 2017, the Federal Tax Authority (FTA) implemented an Excise Tax on certain products, including 100% on both tobacco-related products and energy drinks and 50% tax on carbonated drinks.

Due to the success of these taxes in reducing the consumption of these products, the FTA, as per Cabinet Decision No (52) of 2019, has chosen to extend this Excise Tax, as follows:

  • 100% on any liquids used in electronic smoking devices and tools, regardless of it containing nicotine, in accordance with the Customs Codes as determined by a decision issued by the Finance Minister;
  • 100% on any electronic smoking devices and tools, regardless of it containing tobacco or nicotine, in accordance with the Customs Codes as determined by a decision issued by the Finance Minister; and

50% on any sweetened drinks, including any products to which sugar or other sweeteners are added and produces:

  • ready-to-drink beverages;
  • concentrates, powders, gels, extracts or any form that can be converted into a sweetened drink;
  • any type of sugar determined under Standard 148 of the GCC Standardisation Organisation under the heading “Sugar”; and
  • any type of sweeteners determined under Standard 995 of the GCC Standardisation Organisation under the heading “Sweeteners Permitted in Food”.

Products which will be exempt from the definition of sweetened drinks and therefore not subject to the new Excise Taxes include:

  • ready-to-drink beverages containing at least 75% milk;
  • ready-to-drink beverages containing at least 75% milk substitutes;
  • baby formula, follow up formula or baby food;
  • beverages consumed for special dietary needs, as determined under Standard 654 of the GCC Standardisation Organisation under the heading “General Requirements for Pre-packaged Foods for Special Dietary Use”; and
  • beverages consumed for medical uses as determined under Standard 1366 of the GCC Standardisation Organisation under the heading “General Requirements for Handling of Foods for Special Medical Purposes”.

The expansion of the Excise Tax on the additional products shall take effect on the 1st of December 2019.

If you would like to find out more information, please visit: https://bsabh.com/

New Efforts to Boost Dubai’s position for Commercial Arbitration

The newly formed board of trustees of the Dubai International Arbitration Centre (DIAC) held its first meeting earlier today at Dubai Chamber of Commerce Industry’s head office where it discussed new plans and efforts to boost Dubai’s position as a global centre for commercial arbitration.

The meeting comes after H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, issued a decree related to DIAC, an initiative of Dubai Chamber, which established the centre’s new board of trustees.

The board is joined by legal experts and business leaders, while UAE nationals represent 80% of new members.

The meeting was chaired by Dr. Ahmed Hassan Mohammed bin Al Sheikh, Chairman of the Board of Trustees, and attended by Dr. Ahmed Saeed bin Hezeem Al Suwaidi, the board’s Deputy Chairman; and board members Saeed Mohammed Al Shared Al Falassi; Ahmed Saeed Majed Belyouha; Ahmed Mohammed Ali Al Rashid; Jehad Kazim; Dr. Hassan Mohammed Arab Darwish; Abdulaziz Mohammed bin Shafaar Al Marri; Graham Kenneth Loufit; and Robin Joy Abraham.

During the meeting, board members thanked H.H. Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, for his trust and confidence in the new board which has been tasked with enhancing Dubai’s reputation as a preferred destination to settle commercial disputes.

Dr. Ahmed bin Al Sheikh pointed out that the new board offers a wealth of legal and business expertise which will enhance its ability to meet the evolving demands of Dubai’s maturing business community, and stressed the important role of commercial arbitration in advancing the emirate’s global appeal as an attractive place to do business. He added that the board is in the process of developing new plans and strategies in line with Dubai’s ambitious vision and sustainable development goals, adding that its efforts would help boost investor confidence in the market.

For his part, H.E. Majid Saif Al Ghurair, Chairman of Dubai Chamber, described DIAC as the leading commercial arbitration centre in the Middle East and North Africa, offering a high calibre of arbitration services and facilities applying best international practices in settling commercial disputes.

H.E. Al Ghurair, expressed his confidence in the board of trustees’ ability to achieve its objectives, raise arbitration standards and improving ease of doing business in Dubai.

The Dubai International Arbitration Centre (DIAC), the largest arbitration centre in the Middle East, provides local and international business communities with commercial arbitration services. DIAC was initially established by the Dubai Chamber of Commerce and Industry in 1994 as the Centre for Commercial Conciliation and Arbitration.

If you would like to find out more information, please visit: https://bsabh.com/