Posts

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.

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/

New Dubai RERA Law Issued

His Highness Sheikh Mohammed bin Rashid Al Maktoum, in his capacity as the Ruler of Dubai, earlier this week issued the Dubai law No. (4) of 2019 (“New Law”) pertaining to the Real Estate Regulatory Agency (“RERA”) initially established by law No. (16) of 2007 as predominantly the regulatory arm of the Dubai Land Department (“DLD”).

The New Law provides for a reorganization of RERA’s legal capabilities and capacities and defines a set of important objectives for RERA, including the contribution to the advancement of the real estate sector through an integrated system of regulatory and control measures which shall enhance its role in the overall economic development of Dubai, provide an assuring and supportive environment for the real estate development projects to safeguard the rights of both real estate developers and investors, keep pace with the steady growth of the real estate sector and all related activities, enhance the role of UAE nationals in this sector and implement programs that will enable them to participate in real estate activities, as well as to develop the codes of principles and ethics required for practicing real estate activities.

The New Law confirms that RERA will continue to exercise certain powers established under the previous law, including the organization and supervision of real estate development escrow accounts, approving qualified banking and financial institutions to manage these accounts, and the adoption of rules governing practitioners of the real estate development activity, the sale and rental of real estate, real estate brokers, real estate assessment and joint ownership of real estate property.

The New Law came with a number of key modifications and additions to RERA’s functions and specialties broadening thereby its scope of authority over real estate activities in the Emirate. The newly introduced powers include that RERA shall now be responsible for organizing and licensing real estate activities and supervising the practitioners of these activities in order to ensure their compliance with the laws and regulation governing the real estate sector. RERA will also be responsible for the supervision and inspection of the management, operation and maintenance of joint real estate properties, proposing the necessary legislations to regulate the work of real estate practitioners, and issuing the necessary regulations for the training and qualification of employees in the organizations licensed to practice real estate activities through the Dubai Real Estate Institute (“DREI”), in addition to the registration and issuance of identification cards to practitioners of real estate industry.

Launch of Joint Initiative to Streamline UAE’s Real Estate Sector

A memorandum of understanding (MoU) between DLD and BSA was signed to promote foreign and local investment opportunities in Dubai through an innovative framework that will boost transparency and streamline transaction processes for investors in the sector. As part of the REL initiative, DLD is introducing several investment products to lift restrictions in the current real estate laws that will allow for more vigorous real estate investment in Dubai. The new initiative will especially facilitate the purchase and sale of properties by corporate entities with ultimate foreign ownership, therefore opening up the market to more corporate investors.

Sultan Butti bin Mejren, director general of DLD, said: “At DLD, we are keen to support the directives of our wise leadership and the strategies to make Dubai the smartest and happiest city in the world. The MoU with BSA further supports our mission to consolidate and attract foreign and corporate real estate investments to Dubai. We are working to strengthen the real estate sector in the Emirate through such partnerships that ensure the ease and speed of regulatory and investment procedures.”

Dr Ahmad bin Hezeem, Senior Partner, BSA, said: “The overarching goal of this progressive initiative is to open up Dubai’s real estate market to more investors, increasing investment flows in the process. The REL initiative will provide a legal framework that streamlines and facilitates the process for investing capital in the city. This, in turn, will attract a wider range of investors and transactions. It’s a pleasure to once again be joining forces with DLD in support of the work we have been doing over the past 20 years reinforce our clients’ investment interests in Dubai’s real estate sector. In essence, the enhanced investment framework proposed by the REL will simplify the processes for clients.”

Majid Saqer Al Marri, CEO of the Registration and Real Estate Services Sector at DLD, said: “Our MoU with BSA is another step on our journey to ensuring the comfort and happiness of our customers through streamlining the processes of Dubai’s real estate sector. We will remain vigilant and progress upon our path of helping achieve objectives and keeping pace with developments in the field of registration and real estate services.”

The announcement comes after BSA’s previous collaboration with DLD to host ‘Legal Clinics,’ which provided the public with a six-hour window to access free advice from 25 expert lawyers, who specialise in areas as varied as real estate, construction, employment, compensation claims, criminal matters, debt recovery, tenancy disputes, inheritance, and family matters.

BS-PHOTO

UAE Insurance Authority Issues list of Administrative Fines

The UAE Insurance Authority (‘IA’) has now promulgated and issued the ‘Cabinet Resolution No 7 of 2019 Concerning the Administrative Fines Imposed by the Insurance Authority’ (‘the Resolution’), which was issued by His Highness Mohammed Bin Rashid Al Makhtoum, the Prime Minister of UAE on 6 January 2019, followed by its publication on the IA’s website earlier this month.

The Resolution applies to all licensed United Arab Emirates (‘UAE’) insurance companies and insurance related professionals such as TPAs and Loss Adjustors, defined in the Resolution as ‘Company’ and ‘Insurance-Related Professionals’ respectively. The Resolution provides an extensive list of violations and administrative fines for breach of the listed violations.

The penalties are far reaching in that UAE insurance providers could be exposed to fines of up to AED two (2) million.  Any fine issued by the Board of the IA can be appealed within 15 days of the publication and the Board shall provide a decision on the appeal within 60 days of filing the appeal.

Historically, the fines and penalties under Federal Law No 6 of 2007 were mostly restricted to licensed entities and left scope for evasion of the penalties. The violations and fines listed in the Resolution are likely to be strictly enforced by the IA. By way of illustration, any entity carrying out re-insurance in UAE without the necessary license from the Authority can now be fined AED 250,000.  Similarly, Representative Offices of foreign insurance companies carrying out their business in UAE without prior approval from the Authority will attract a fine of AED 250,000.

In addition, insurance mediation with a non-licensed UAE insurance company is not permitted and attracts a fine of AED 100,000. Reinsurance and insurance mediation violations within the Resolution provides an interesting interpretation in the context of current UAE reinsurance and insurance mediation operations in the UAE, which might expose insurance providers and their insurance counterparties inadvertently to penalties.

The Resolution comes into force from 6 April 2019 and is significant in terms of the 204 listed violations and the financial costs to the stakeholders of the UAE insurance industry should they not correct their regulatory position within 5-6 weeks.

Many UAE insurance providers will need to audit their regulatory position including meeting the UAE solvency obligations under the UAE Financial Regulations as well as their operational and distribution requirements in order to avoid risk of violating the provisions of the Resolution.

Insurance providers should carefully review the provisions of the Resolution and the attached Schedule to correct any violations or potential violations to avoid costly and unnecessary penalties.  No upper limit has been prescribed for the fines, nor are there any provisions for compounding of the fine, perhaps suggesting that the fines will be multiplied by the number of times the violation occurred.