Davidson & Co Updates
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Dec 2021
Major developments have been implemented across the UAE in the last 12 months. Legislators and regulators have continued to refine local law to improve and implement international best practice across the UAE. We have highlighted some of the major developments along with a selection of anticipated changes.
In November 2021, the UAE Cabinet approved the Federal Law No. 33 of 2021 (the New Labour Law) which will be effective as of 2 February 2022. The New Labour Law provides a radical overhaul of the current UAE Labour Law which will apply across the seven emirates as well as the free zones, except for DIFC and ADGM.
The New Labour Law brings changes to employment contracts as fixed term contracts, flexible working arrangements, amendments to termination provisions, end of service gratuity and prohibits discrimination and harassment along with several other changes.
Implementing Regulations are referenced throughout the New Labour Law and these Regulations are yet to be issued by the Ministry of Human Resources and Emiratisation. It is anticipated that these Regulations will provide further detail as to the intended operation of the New Labour Law. Although it is not clear when these Regulations will be issued, we anticipate that they will be issued on, or shortly prior to, the effective date, 2 February 2022.
Recently it was announced that from 1 January 2022, all UAE federal government entities will move to a four and a half day working week. In addition, the working week would start on Monday and end on Friday. Importantly, all schools will also change to a Monday to Friday working week. In light of these changes, it is inevitable that private sector companies, both onshore and offshore, will mirror these changes and move to a Saturday and Sunday weekend.
Employers that intend to change the working week should ensure that their employees are properly informed of any proposed changes. In addition, employment contracts and policies should be reviewed, and consideration should be taken as to the arrangement for employees who wish to attend Friday prayers.
Early into 2021, the DIFC Authority announced a consultation period on the DIFC Law No. 2 of 2019 (as amended by DIFC No. 4 of 2020). On 21 September 2021, the amendments were reflected within DIFC Law No. 4 of 2021 (the New DIFC Law) along with the Employment Regulations 2021.
The key aspect of the amendments was to ensure that the DIFC Employment Law operated as it was intended and to limit any potential abuse of the rules. As such, the New DIFC Law narrowed the scope of the “Additional Payments” definition to ensure that only these payments could be excluded from the calculation of the DEWS contribution and that any agreement to limit the employee’s monthly wage would be null and void.
Another key change was that the New DIFC Law extended safeguards to secondees as well as short-term employees providing them with protection from discrimination and harassment.
This year brought significant changes to the Dubai Arbitration Centres.
In January the new DIFC-LCIA Arbitration rules were published but by September the introduction of the Decree No. 34 of 2021 concerning the Dubai International Arbitration Centre (the Decree) altered the landscape for arbitrations in Dubai.
The Decree abolished the Emirates Maritime Arbitration Centre (EMAC) as well as the Dubai International Finance Centre Arbitration Institute (the DAI).
The DAI provided the administration for the local concept of the London Court of International Arbitration, the DIFC-LCIA Arbitration Centre. The DIFC-LCIA operated under the DIFC-LCIA Arbitration Rules which largely mirrored the LCIA’s.
The purpose of the Decree was to create a single consolidated arbitration centre in Dubai known as the Dubai International Arbitration Centre (DIAC). While the dissolution of the EMAC and the DAI was effective as 20 September 2021, Article 9 of the Decree provides DIAC with a six-month grace period to regulate the centre in accordance with the new Decree. Article 2 of the Decree provides that the headquarters shall be located onshore in Dubai with a branch within the DIFC (offshore).
These changes are of particular relevance for parties currently involved in arbitration but also to those with agreements to resolve disputes under the rules of either DIFC-LCIA or EMAC.
As such, it is expected that new DIAC Rules shall be published in accordance with the Decree and shall update the current 2007 DIAC Rules.
The right to claim interest was recognised in 1993 under the Federal Law No. 18 of 1993 establishing the Commercial Transactions Law. In the absence of a contractually agreed interest rate, Article 76 of the Commercial Transaction Law provided that a creditor could claim up to 12% interest per annum until full settlement was received.
In practice, the onshore courts have applied interest at a rate of 9% per annum where parties were not bound by a mutually agreed contractual rate.
On 9 June 2021, the Court of Cassation issued a unanimous decision to revise its longstanding practice. Resolution No. 1 of 2021 (the Resolution) was issued, binding the Dubai Courts to apply an interest rate of 5% per annum where parties were not bound by an agreed rate. While this Resolution applies to the Dubai Courts only, we can expect that the Courts of the other emirates will apply a similar interest rate.
2021 has clarified the scope for creditors to recover debts through a fast-track process known as a payment order. This allows creditors to obtain a monetary judgment as opposed to raising a substantive claim at the Dubai Courts.
This year, the Court of Cassation clarified that such claims required to be supported by written evidence confirming that the debt had been accepted, or acknowledged, as being due by the debtor.
In addition, the UAE Civil Procedure Code was amended in August 2021 to provide that the Dubai Court had jurisdiction to hear a debt case, even if the conditions for issuing a payment order were met. This eliminated the risk of the Court dismissing the case and provided reassurance to litigants.
A new UAE Penal Code is expected in the new year which will form part of several new reforms introduced in 2022.
The new UAE Penal Code shall modernise the current legislation. A number of amendments relate to bounced cheques which is a criminal offence in the UAE. The Federal Decree No. 14 of 2020 amended the Commercial Transaction Law No. 18 of 1993 and the new amendments shall be effective as of January 2022.
The amendments primarily focus on the decriminalisation of bounced cheques and partial payment of a cheque. These amendments provide a limited criteria for a bounced cheque to carry a criminal sanction and will decrease the vast number of actions at the criminal court. In addition, a payee can provide consent in writing for the bank to issue any amount available to the drawer of a cheque where there are insufficient funds. In essence, this provides consent that the balance is due and a civil action could be raised for the balance.
In an effort to develop the nation’s legal framework, the UAE government has issued Federal Law No 32 of 2021 (the New Companies Law) which is to come into force on 2 January 2022. The New Companies Law replaces Federal Law No. 2 of 2015 (the 2015 Companies Law) which has been the main legislation guiding commercial transactions since its inception.
The New Companies Law will consolidate and repeal the 2015 Companies Law and its amendments, as well as implement key changes in commercial governance and transactions. To offer a brief summary of the anticipated changes, the New Companies Law addresses mergers and acquisition transactions with the recognition of two new corporate vehicles, (i) the special purpose acquisition company, and (ii) the special purpose vehicle. The New Companies Law also provides for numerous governance and management provisions relating to Limited Liability Companies and Public Joint Stock Companies.
Implementing regulations and further guidance are anticipated to be issued in the new year.
Federal Law No. 16 of 2021 on Factoring and Transfer of Accounts Receivables (the Factoring Law) which was entered into force on 8 December 2021, offers the first regulatory framework to address specific transactions concerning factoring and assignment of receivables. Previously, the only guidance available for these transactions was Federal Law No. 5 of 1985 on Civil Transactions Law which addressed aspects of governing the assignment of debt, and Federal Law No. 4 of 2020 on Securing Interest with Moveable Property which addressed aspects of assignments over receivables taken by way of security.
The implementation of this law unifies the regulations which apply to assignments in the UAE and offers a foundation for the development of a new legal regime. The Factoring Law addresses the requirements for assignments and transfers of receivables in the region, as well as provides guidance on how to determine the validity and priority of competing claims over assigned receivables.
2021 has seen sweeping changes across many sectors effecting the UAE and freezones as reforms align to international standards. The pace of legal and regulatory change will continue well into 2022 with further reforms and regulations expected. It will be interesting to see how these changes unfold in practice throughout 2022.
For further information, or to discuss in more detail any of the above changes, please contact Joanna Stewart (jstewart@davidsoncolaw.com) or on 04 343 8897 where our team will be delighted to assist you.
December 2021
