• Economy/ Legal Update/ Taxation

    VAT Update – Insight On the New UAE VAT Law


    This is a short update from our previous blog article relating to the implementation of VAT in the UAE.

    On 23 August 2017, Federal Law No. 8 of 2017 concerning Value Added Tax (the “UAE VAT Law”) was issued together with the launch of the official tax website for the Federal Tax Authority. Further detail will become available in the yet-to-be-published Executive Regulation.

    Here’s a summary of what we know from the UAE VAT Law:

    • Implementation Date – 1 January 2018. The VAT registration process will open from mid-September 2017.
    • VAT rate – 5%.
    • What will be taxed – “taxable supply of goods or services for consideration and deemed supplies by a taxable person conducting business in the UAE and the import of taxable goods.” Includes imports of goods and services subject to the reverse charge mechanism.
    • Who will be required to account for VAT – The supplier of the goods or services; the importer of taxable goods; and the taxable person registered for VAT who acquires goods.
    • VAT registration – VAT registration will be compulsory where the annual supplies exceed AED 375,000 (the mandatory registration threshold). VAT registration will be optional if the mandatory registration threshold requirement is not met but the taxable supplies or expenses exceeds AED 187,500 (the voluntary registration threshold). In addition:
      • Group VAT registration will be available for related parties who meet specific criteria
      • Government entities will also be required to register for VAT.
      • Individuals not registered for VAT will be required to pay tax on import of taxable goods from outside the GCC at the time of import.
    • Zero rated supplies – Certain exports, supply of certain education and healthcare services and related supplies, supply of crude oil and natural gas, certain investment grade precious metals, supply of new-build residential properties within 3 years of completion and supply of certain means of transportation.
    • Exempt supplies – Certain financial services, residential supplies other than the first supply noted above, bare land and local passenger transport.
    • Free Zone – Subject to certain exceptions, a designated zone that meets specific criteria in the regulations shall be treated as being outside the UAE and goods transferred from one designated zone to another designated zone will not be subject to VAT. Exact details will be in the Executive Regulations. In particular, it remains to be seen how financial free zones such as the ADGM and the DIFC will be treated.
    • Invoices dated pre 1 January 2018 – Various transitional rules apply for cases where (i) payments or invoices are advanced before 1 January 2018; (ii) where contracts are concluded before 1 January 2018 and are silent on VAT; and (iii) contracts are concluded before 1 January 2018 but the supply is made after this date.

    For example, if a contract entered into in 2017 for a supply to be made in 2018 does not contain express provisions about tax on that supply, the price will be considered to include VAT if chargeable, whether or not the tax liability has been taken into account in determining the price. It is therefore recommended that express provision be made for VAT now in the supply of future goods/services.

    • Retaining VAT invoices – Any taxable person must retain VAT invoices issued and received for a minimum of 5 years.

    With four months remaining for VAT to apply in the UAE, it is important for individuals to consider the impact of VAT on their business and to comply with VAT obligations by seeking independent financial advice.

    Davidson & Co. are available to assist with any VAT implementation queries you may have specific to your business criteria, including the review and amendment of commercial agreements to understand the applicable VAT position.

  • Property

    Investors rush to Dubai Courts as City of Arabia developments are cancelled


    Certain City of Arabia projects have been officially declared cancelled by the Real Estate Regulatory Agency in Dubai (“RERA”) and have become the subject of the Special Judicial Committee for the Liquidation of Cancelled Real Estate Projects in Dubai (the “Committee”).

    Pursuant to the relevant UK laws, once a project is cancelled by RERA, the Committee has to consider all relevant claims and liquidate the cancelled project under a final resolution. Each project is assigned to a specific liquidation panel within the Dubai Courts. The liquidation panel aims to compile a list with the details of all investors, the number of units purchased and the amount of money paid towards each unit. This list will be made available to the investors of the project who can challenge any incorrectly published information.

    Liquidation Process
    Eventually, a private hearing will be held and the Committee will start the liquidation process in order to establish and disseminate the funds available amongst the investors of each project in accordance with their investment, after deduction of the relevant liquidation fees and other applicable professional fees.

    Metro Tower and Wadi Walk Projects
    The Metro Tower project (of City of Arabia) has already been assigned to the Committee. In light of this, Davidson & Co Legal Consultants can assist with registration of investors’ interests with the liquidation panel and subsequently monitor the associated procedures leading up to the recovery of the invested funds.

    Additionally, the Wadi Walk project (of City of Arabia) is also in the process of being assigned to a liquidation panel in the Committee and it is essential for investors to keep up to date with the progress of the Committee and liquidation of the project to ensure minimum recovery of their invested funds.

    Time Frame
    It is difficult to provide an approximate time frame regarding the liquidation of the above-mentioned projects because the process relies on various factors. However, it is suggested that investors proactively monitor the Committee’s progress in this regard so as to ensure their claims are taken into account.

    For more information on how you can register your interest in the City of Arabia projects and further details on how to maintain regular updates on the progress of the Committee’s work, please contact:

    Kimia Kalantarian

  • Legal Update/ Taxation

    New Tax Procedures Law Announced in the UAE

    Over the last decade, the UAE’s attempts to diversify its economy and move away from reliance on oil has been largely successful.  The most recent evidence of this is the announcement in 2016 regarding the introduction of VAT across not only the UAE but the wider GCC region.
    To further back this up and allow for the orderly transition, new tax legislation has been issued by UAE President, Sheikh Khalifa.
    Federal Law No. 7 of 2017 (the “Tax Procedures Law”) lays the foundations for an enhanced UAE tax system, which will regulate the administration and collection of taxes, starting with VAT in 2018, and defines the role of the Federal Tax Authority (FTA).
    The law sets out the rights and obligations of the FTA and the taxpayer and covers tax procedures, obligations, audits, refunds, collections and objections.
    Key provisions of the Law:
    – requires businesses to keep accurate accounting records
    – requires any business or individual to register with the FTA
    – requires any taxable business or person to prepare a tax return
    – mandates that all tax agents must be registered
    – allows the authorities to perform tax audits
    The establishment of the FTA and The Tax Procedures Law seeks to ensure a smooth transition into tax paying nation.  At this moment in time, there has been no indication that other taxes (such as tax on personal income) is something that will also be introduced.  The UAE government is keen to ensure a sustainable and successful economy into the future; diversifying and increasing revenue streams through taxation is the next obvious step in this process.  They have also stressed that the additional resources will be used to further advance development and infrastructure in the country.
    The full text of the new Tax Procedures Law can be found on the Ministry of Finance’s website – www.mof.gov.ae
    Based in Dubai, Davidson & Co can assist with any legal queries relating to this new legislation, as well as any corporate law or company formation requirements in the UAE.  We’re here to help, so please get in touch.
  • Corporate Law/ Economy/ Legal Update

    The Continued Growth of the DIFC


    Abu Dhabi Judicial Department (“ADJD”) and the Dubai International Financial Centre (“DIFC”) Courts  

    On the 30th of April 2017, the DIFC announced the execution of a Memorandum of Understanding (“MoU”) with the ADJD concerning legal cooperation between the two parties in light of enhancing the judicial efficiency in the UAE.

    The parties are yet to release more information about the MoU and their mutual goals, however the main objective of the MoU is for both parties to work in partnership in overcoming potential legal obstacles in the UAE. The MoU identifies eight specific fields of corporation between the parties with a view of adding to the list.

    Below are examples of some of the areas of corporation outlined in the MoU:

    1. Exchanging expertise in the field of e-services and information technology with the aim of improving the efficiency of the judicial system (such as in e-management of claims and judicial e-announcements) and improving access to information of the courtrooms for judges and litigants (recording the hearing minutes electronically).
    2. Exchanging opinions on the applicable fees for civil and commercial cases of dual jurisdiction in accordance with all applicable laws & regulations.
    3. Facilitation of the procedures of judicial cooperation, particularly in terms of judgment enforcement in accordance with all applicable laws & regulations.
    4. Exchanging information and opinions on judicial supervision and best internationally adopted practices.

    This MoU is moving towards creating a strong relationship between the parties but also a platform for further growth and cooperation in the future. The MoU also suggests that states in the UAE are working together towards raising the DIFC’s status within the region and also the UAE as a global financial hub.

    Dubai Department of Economic Development (“Dubai Economy”) and the DIFC

    In 2010, the Dubai Economy and the DIFC signed an agreement with a view of unifying licensing procedures in the DIFC and Dubai mainland.

    More recently, on the 1st of May, the DIFC have announced signing an MoU with the Dubai Economy in accordance with which the Dubai Economy would provide companies registered in the DIFC with licenses to operate in Dubai mainland. This is increasingly beneficial for businesses in the DIFC wishing to branch out as this development would enable them to contract with third parties and attract new customers or clients in Dubai mainland.

    The parties have in line with this new plan, concluded to set up a data room which would enable both parties to exchange data and information efficiently.  Such flexibility within the system is likely to improve transparency and increase consumer protection.

    This decision is also likely to further the diversity of services available to third parties and businesses established in Dubai mainland whilst creating some friendly competition between the companies operating in Dubai mainland and those migrating from the DIFC.

    Overall, this move towards simplifying the rules and regulations will create a business friendly environment for investors in the DIFC and is a stepping stone to developing a unified business environment for foreigners in the UAE.

  • Uncategorized

    New UAE Traffic Laws – What You Need to Know

    traffic camera

    Amended traffic laws for the UAE were announced on 21st March following four years of intensive research and studies, with the main aim to reduce road traffic deaths from the current figure of 6 in 100,000 to 3 in100,000 in line with the UAE Vision 2021.

    The move is welcomed by advocates of road safety in making UAE’s roads safer for everyone, and is aligned with the UAE Strategic Traffic Plan. 2016 saw a 7.4% increase in the number of road accident fatalities with 725 deaths recorded in comparison to the previous year, when the fatality figure was 675.

    Major General Mohammed Saif Al Zafeen, Head of the Traffic Prosecution Council and Assistant Commander in Chief of Dubai Police Operations stated that the new federal traffic laws would come into effect on 1st July 2017. As well as the law amendments, new and amended fines for traffic violations will also be introduced in a further effort to deter UAE drivers from breaking the law.

    The New Traffic Laws and Fines

    Mandatory seat belts for all passengers

    All passengers travelling in a vehicle, including those in the rear seats, must wear a seat belt. The law follows on from European studies into seat belt wear in prevention of road accident deaths and injuries, where more stringent seat belt rules have resulted in a considerable reduction in road accident fatalities.

    A fine of AED 400 will be issued per passenger found not to be wearing a seat belt.

    Children in vehicles

    The amendment means that only children over the age of 10 may travel in the front passenger seat, and must be at least 145 cm tall.

    Child safety seats are now mandatory for children under the age of four – violation of this rule means a fine of AED 400 and four black points on the driver’s licence.

    Amended speeding and reckless driving rules

    In an effort to curb speeding and reckless driving offences, fines, issuing of black points and confiscation measures have been updated as part of a zero-tolerance stance on these violations.

    Being caught speeding at 60 Km/H or over the stated speed limit will incur a hefty AED 2,000 fine, 12 black points, and the car impounded for 30 days. The worst speeding violations will see AED 3,000 fines issued, and the vehicle confiscated for three months.

    Recreational vehicles such as quad bikes are not allowed on public highways and residential areas, anybody violating this rule will be slapped with AED 3,000 in fines and confiscation of the vehicle for a month.

    Additionally, driving a vehicle without number plates will cost the driver dearly with a fine and 24 black points on their licence.

    New radar to detect driving violations

    Earlier in March, Dubai Police Traffic Department launched a new radar device to track drivers who do not adhere to mandatory routes on Dubai’s roads. It’s an innovative solution to catch drivers who ignore the rules and endanger other drivers and pedestrians on the emirate’s streets. The device is able to capture images up to 1,000 m in both directions, tracking cars as they move from side to main streets.

    In addition to the amended traffic rules and fines, the Federal Traffic Council is due to discuss the introduction of community service for drivers committing more severe, dangerous driving offences such as excessive speeding and recklessness.


  • Corporate Law/ Legal Update

    A Guide to Corporate Structures in Dubai


    Setting up in Dubai

    Over the last 30 years, Dubai has transformed itself from a local trading community into one of the most popular and successful destinations for corporate and commercial set ups. With its growing multi-jurisdictional nature, and in the absence of income tax for both mainland registered companies and those registered in the free zones, Dubai has become a major trading hub in the region for local and foreign companies wishing to establish a business presence in the region.

    Mainland Dubai

    Dubai’s Department of Economic Development (DED) is the department for licensing and registration of corporate entities in mainland Dubai and the Commercial Companies Law (CCL), as amended, is the federal law that regulates all entities set up in the UAE mainland, and regulates corporate entities set up in mainland Dubai.

    Limited Liability Company

    A Limited Liability Company (LLC) is the most common form of business set up in Dubai. When forming a LLC, the CCL prescribes that at least 51% of the shares must be registered with a UAE national (natural or legal person).

    Commonly, where a UAE national (otherwise known as a Local Partner) is used and the foreign investor owns 100% of the beneficial interest in the LLC, the LLC’s memorandum of association can be structured in such a way so as to transfer all authorities, rights and powers to operate and manage the LLC to the foreign investor, including for example the ability to appoint the general manager and the company board of directors.

    Another safeguard to protect the foreign investors interests in the LLC can be provided in the form of a unique set of contractual arrangements commonly known as side agreements. This comprises a set of agreements entered into between the foreign investor and Local Partner with the aim of vesting all managerial control, voting and dividend rights in the LLC to the foreign investor. As such, the Dubai LLC formation allows companies to establish flexible, differential profit sharing arrangements with a UAE Local Partner. The Local Partner can be paid a fixed annual fee, a percentage of sales or a percentage of profits.

    The Free Zones

    Dubai is home to over 20 free zone jurisdictions that cater to various industrial and business clusters where foreign investors can enjoy 100% foreign ownership of their companies. Across the UAE, there are designated territorial areas that are considered separate legal jurisdictions from the UAE government, which allows free zone jurisdictions to govern, license and register corporate entities independently.

    Another major advantage to foreign investors is that free zone laws generally prescribe a guaranteed tax-free period of 50 years and there are no restrictions on the repatriation of capital or profits. The main restriction for a free zone corporate entity is that it cannot actively trade outside of the territorial parameters of the free zone unless it appoints a Dubai mainland based commercial agent.

    Offshore Companies 

    Certain free zones, for example the Jebel Ali Free Zone in Dubai offer the concept of an offshore company in the UAE.  Offshore companies are flexible corporate entities which are generally used as holding companies in the UAE.

    Offshore companies are very quick to set up, there are no limitations on foreign ownership and there is no minimum share capital requirement. A minimum of 2 directors (maximum of 5) are required, all of whom must be natural persons (no corporate directors). Shareholder(s) may be either natural persons or corporate entities, any of which may also be non-residents (expatriates).

    Furthermore, offshore companies can open and operate bank accounts as well as own investments inside and outside of the UAE. The other major advantage lies in Dubai property ownership. Select offshore companies such as those incorporated in the Jebel Ali Free Zone can own real estate in Dubai in certain designated areas. Therefore, any income generated from the company’s investments (such as real estate) can be held in the company bank account and repatriated thereafter.

    Davidson & Co is a boutique law firm established in Dubai in 2008, with lawyers and legal consultants drawn from across the globe.  Providing a unique combination of corporate / commercial expertise; dispute resolution solutions; as well as private client advice, we are able to cater to the mass market and offer unparalleled legal services in the region.


    For more information about our capabilities and accolades, please visit http://www.davidsoncolaw.com/about.html or contact 04 343 8897 and ask to speak to one of our associates.

  • Legal Update

    Dubai Judicial Committee

    DIFC courts

    The creation of the DIFC common law jurisdiction in coexistence with the civil law jurisdiction of the UAE has been a unique and successful development.

    The DIFC Courts have established themselves as a conduit jurisdiction for the recognition and enforcement of both domestic (i.e. onshore, or mainland Dubai) and foreign arbitral awards for onward execution against assets of award debtors in onshore Dubai even in the absence of any connection with the DIFC. Notwithstanding this, the proximity of the two jurisdictions, onshore and DIFC, has given rise to questions of jurisdictional conflict.

    In order to overcome a conflict of judgments and by adoption of a decree last year (see Decree No. (19) of 2016 forming the Judicial Committee of the Dubai Court and the DIFC Courts, dated 9 June 2016), which entered into immediate effect, the Ruler of Dubai established a Judicial Committee of the Dubai Courts and the DIFC Courts (the Dubai Judicial Committee).

    The Dubai Judicial Committee is comprised of seven members: three judges from the DIFC Courts, three judges from the Dubai Courts and the Secretary General of Dubai’s Judicial Council, with the President of the Dubai Court of Cassation (one of the three Dubai Court judges) having the casting vote.

    The Dubai Judicial Committee has been established to promote the full mutual integration of the Dubai and DIFC Courts and to internalise any constitutional conflict between the onshore Dubai Courts and the DIFC Courts.

    The Dubai Judicial Committee rendered its first decision in the case of Daman Real Capital Partners Company LLC v. Oger Dubai LLC (Cassation No. 1/2016) where it was asked to decide which of the two courts, the DIFC Courts or the onshore Dubai Courts, had jurisdiction to hear the case.

    The case involved two parallel actions before the two courts, specifically (1) an application for annulment of a DIAC award rendered in mainland Dubai as the seat of the arbitration before the onshore Dubai Courts which were the courts with supervisory jurisdiction over the arbitration and (2) an application for the recognition and enforcement of that award before the DIFC Courts for execution in the DIFC. It is crucial to note that the action for annulment before the onshore Dubai Courts was served first and preceded the action for recognition and enforcement before the DIFC Courts.

    In the DIFC Court proceedings, the DIFC Court ordered a stay of the enforcement action awaiting the outcome of the annulment action in the onshore Dubai Courts, however, only on the condition and order that Daman paid security into court. After failing to comply with this order, the DIFC Court proceeded to recognise and enforce the award and ordered that Daman be wound up.

    Alongside this, the onshore Dubai Courts, hearing Daman’s annulment case, held that they had lacked jurisdiction to do so as the DIFC Court had already declared the enforceability of the award. Following this decision, Daman applied to the Dubai Judicial Committee on the grounds that a conflict of jurisdiction had occurred between the onshore Dubai Courts and the DIFC Courts.

    Against this background, the Dubai Judicial Committee held that:

    • there was a conflict of jurisdiction between the two courts;
    • the case be remitted for trial to the Dubai Courts;
    • the DIFC Courts“should cease from entertaining the case” and
    • there is no similarity between this case and the case when it’s sought to enforce or annul a foreign arbitral award in several jurisdictions pursuant to the New York Convention 1958”.

    All three of the DIFC Court judges sitting on the Committee dissented from the ruling that the DIFC Courts should cease from entertaining the case.

    It is clear from the Dubai Judicial Committee’s findings that in order to prevent a conflict of jurisdiction that may occur from contradictory outcomes of the courts, the Dubai Judicial Committee relied on a first-seized rule, giving preferential jurisdiction to the onshore Dubai Courts, which were seized in an action for annulment of the award prior to the application for ratification and enforcement being filed with the DIFC Courts.

    The legal analysis surrounding the Dubai Judicial Committee’s decision is short and lacks guidelines further assist the parties and legal professionals in general. Given the current lack of detail in the Dubai Judicial Committee’s findings that the DIFC Court “should cease from entertaining the case“, it is currently difficult to form a decisive view as to the full reasoning behind the decision.

    In another development relating to the DIFC Courts, the Dubai Court of First Instance issued a judgment on 15 February 2017 annulling the DIFC Courts’ judgments in the case of Meydan v Banyan Tree. This development comes soon after the Dubai Judicial Committee’s ruling in the Daman Real Capital Partners Company LLC v. Oger Dubai LLC  case which has effectively limited the ability of the DIFC Courts to act as a conduit jurisdiction for domestic awards.

    The judgment of the Dubai Court of First Instance in Meydan v Banyan Tree suggests that further guidance and more detailed reasoning from The Judicial Committee in the future would greatly assist the legal community in making its own determination when considering the scope and acceptance of the jurisdiction of the DIFC Courts across onshore Dubai

  • Employment/ Legal Update

    Dubai’s New ‘One Day Court’ to Cut Litigation Time by 60%

    dubai new law

    Dubai’s new ‘One Day Court’ – also known as ‘One Day Misdemeanor Court’, initiative was officially rolled out on 8 March 2017 with the aim ensuring swifter justice in the legal process for at least 21 types of minor offences – such as cheque disputes, alcohol related offences, residency and traffic cases.

    The new court initiative was approved by His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai, as part of Penal Order Law No. 1 of 2017 on 7 March 2017, and extends across all Dubai police stations.

    Reducing litigation waiting time by 60%

    One of the main disadvantages with the current judicial process in Dubai is the lengthy waiting period for scheduling of court dates, and for the supporting investigation to take place. The initiative aims to combat waiting periods and subsequent costs associated with those detained for minor offences, and will serve to streamline the litigation process in a city with an ever-expanding population and lodging of criminal cases to go with it.

    Based on a pilot of the ‘One Day Misdemeanor Court’ initiative in 2015, trialed with the General Directorate of Residency & Foreigners’ Affairs; the Traffic Department; and Al Muraqqabat police station, it is predicted that waiting times for minor offenses will be reduced by 60%.

    Fast-tracking verdicts

    Onsite Public Prosecution and courts set-up at police stations will simplify the process for individuals with a two-phase verdict process delivered within 24-hours. This provides scope for many petty cases to be directly handled and settled by the Public Prosecution by way of a ‘punitive order’, without the requirement for court involvement. More minor crimes may be settled with the issuance of fines, without impacting the integrity of the law.

    Examples of legal cases facilitated:

    General Directorate of Residency & Foreigners’ Affairs
    • Illegal entry and residence in UAE
    • Returning to UAE after deportation
    • Working after labour ban issue

    Dubai Police:
    • Possession and consumption of alcohol
    • Signing cheques without sufficient funds
    • Failure to meet due payments

    Dubai Traffic Prosecution:
    • Drink driving
    • Driving without a valid license
    • Involvement in traffic accidents resulting in injury

    The ‘One Day Court’ initiative will seek to benefit much of the Emirate’s community, especially expatriates who find themselves involved in minor offenses, where uncertainty in the legal processes and timings can create a more stressful situation. The increased efficiency of these types of cases may provide more reassurance and clarity for individuals who have found themselves in these circumstances.

    Davidson and Co has extensive experience in litigation and dispute resolution, and our lawyers and legal consultants are equipped to advise and support on a broad range of legal matters including those outlined in the ‘One Day Court’ initiative.

    To get in touch, please call us on +971 4 343 8897 or simply click here to send us a message.

  • Legal Update/ Property

    New UAE Pledge Law

    uae pledge law

    On 12 December 2016, Federal Law No. 20 of 2016 regarding the Pledge of Moveable Properties in Guarantee of Debt (“Pledge Law”) was issued and published in the Official Gazette on 15 December 2016.

    The Pledge Law, which comes into effect around 15 March 2017, will seek to introduce a new regime for registering a pledge (or mortgage) over movable assets (including future assets) which are pledged as security for the repayment of a debt.

    Previously, unregistered pledges simply created a contractual right that required enforcement by the UAE civil courts. The Pledge Law allows a pledgor to perfect its legal rights over the movable assets through registration. Once registered, the pledgor has priority over third parties, and the registration is deemed notice to third parties. The new law should also enable security to be taken over a much wider range of movable property.

    Key features:

    • Lenders will no longer be required to take possession of movable assets in order to perfect a pledge over the same. Instead, parties can enter into a written agreement which complies with the Executive Regulations (to be introduced) in order to create security.
    • Lenders may secure a pledge over tangible / intangible assets of a commercial business, as security for any funding provided to acquire such commercial business. Provided that the pledge is registered before the creation of any other rights on the relevant assets, such pledge will have priority over the rights of any purchaser or lien holder.
    • It is not yet clear to what extent this would replace the current use of commercial mortgages, which also secures an interest over tangible and intangible assets.
    Examples of registerable pledges Examples of non-registrable pledges
    • Bank accounts
    • Receivables
    • Commercial paper
    • Tangible and intangible assets (e.g. bonds)
    • Title deeds
    • Raw materials
    • Movable property affixed to real property capable of division
    • Future assets (previously not possible)


    • Moveable assets that can only be pledged by possession.
    • Assets where UAE laws require an interest to be registered under a specific register (e.g. automobiles, vessels, LLC company shares).
    • Personal goods, unless pledged as security for financing their purchase.
    • Proceeds under insurance policies (unless related to a pledged asset)
    • Future inheritance

    If the pledgor fails to perform its obligations under the pledge contract then the pledgee may (following prior written notice) request the sale of the pledged asset at market value within 10 working days, provided that certain conditions are met.

    There is currently no requirement under the Pledge Law for a secured creditor to be a licensed UAE bank. It remains to be seen whether this restriction appears in the Executive Regulations, or would be required in practice in order to register a security interest.

    At Davidson & Co we can help with all of your commercial or property law requirements.  For more information on how to register a pledge, including drafting a pledge contract, please do not hesitate to get in touch.

  • Legal Update

    The Continuing Development of Dubai’s Legal System


    In the recently published ‘2017 Edelman Trust Barometer’ the UAE was once again, for the sixth consecutive year, ranked 2nd globally for public trust in its government. It is this trust and confidence that helps the UAE to continue to perform so well across a multitude of industries. This growth is especially evident in Dubai.

    A key component that enables Dubai to successfully develop as quickly and as efficiently as it does, and what this article will focus on, is its legal system that is easily accessible.

    Dubai Courts

    The local judicial system in Dubai is made up of the following courts: the Court of First Instance, the Court of Appeal and finally, the Court of Cassation, which is the highest court in Dubai. All decisions of the Court of Cassation are final.

    In our experience, expatriates have often found that the local Courts are difficult to use, not least because submissions are made and hearings are conducted in Arabic.

    Expatriates can, of course, appoint local law firms to represent them at hearings and there are numerous translation companies in Dubai that can assist with the translation and interpretation of court documents. Naturally, however, this remains a relatively alien forum for non-Arabic speakers and costs more money than if the proceedings were in English. This may be the reason why local and international entities are shifting towards the Dubai International Financial Centre (DIFC) Courts as a more accessible dispute resolution forum.

    The DIFC Courts

    The DIFC Courts are an independent English language common law judiciary, which are based in the DIFC with jurisdiction to hear civil and commercial disputes involving regional and international entities. The Courts began operations in 2006, and there has been a continued development of the system, aimed at making it more streamlined.

    An attractive feature of the DIFC Courts’ common law judiciary is that it is similar to that of the United Kingdom. This is often assuring for expatriates, as they recognise this system. It also helps that parties are able to appoint international counsel to represent them, most of which will be subject to stricter regulations in terms of providing legal advice than local law firms.

    Historically, the jurisdiction of the DIFC Courts could only be applied if the concerned parties expressly opt-into the jurisdiction, by specifying this in the ‘Governing Law and Jurisdiction’ provision of their contract. However, if a contract does not contain an exclusive jurisdiction clause, it does not necessarily mean that the parties would not have access to the DIFC Courts. If the disputed matter falls within any of the five jurisdictional gateways provided under Article 5A(1) of Dubai Law No.12 of 2004, or if a party had assets within the DIFC, then there would be grounds to use the DIFC Courts.

    In more recent years, however, the ability to use the DIFC Courts to deal with disputes seems to have widened. There have been several cases where the DIFC Courts interpreted the meaning of the phrase “the Courts of Dubai” to include the DIFC Courts since they were formed within the territory of Dubai and were established by laws of the UAE. As a result of Dubai’s growing position as a central hub for investment in the Middle East and the DIFC Courts’ exceptional experience in dealing with sophisticated commercial matters; there is a noticeable increase in the number of companies and individuals choosing the DIFC jurisdiction over the local courts.

    The New York Convention

    The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, came into force in June 1959. The Convention requires courts of contracting states to give effect to private agreements to arbitrate, recognise and enforce the arbitral awards concluded in other contracting states. The UAE was ratified as a member of the New York Convention in August 2006 which has further extended the jurisdiction of the DIFC Courts.

    As is expected, substantive DIFC judgments provided by the DIFC Courts can be referred to the Dubai Courts for enforcement on assets outside of the DIFC. What is more useful however is that DIFC Court judgments can be converted into arbitral awards that can subsequently be enforced in countries that are signatories to the New York Convention. This is a considerable power that DIFC Courts have that is beneficial when parties have assets outside of the UAE.


    To summarise, Dubai’s DIFC Court system is an internationally recognised and respected regulatory framework, that provides judgments that are relatively easy to enforce either in the DIFC, in mainland Dubai, or in countries that are party to bilateral or multilateral treaties with the UAE, such as the New York Convention.

    Evidently, with the DIFC Courts only beginning its operations in 2006, it is a relatively new judicial system. In light of current trends, it is clear that there is going to be further developments and ironing out of procedures, towards increasing accessibility of the DIFC Courts for local and international entities. The DIFC Courts are therefore a constantly growing and promising platform for use.


    Davidson & Co is a boutique law firm established in Dubai in 2008, with lawyers and legal consultants drawn from across the globe.  Providing a unique combination of corporate / commercial expertise; dispute resolution solutions; as well as private client advice, we are able to cater to the mass market and offer unparalleled legal services in the region.

    For more information about our capabilities and accolades, please visit http://www.davidsoncolaw.com/about.html or contact 04 343 8897 and ask to speak to one of our associates.