On 22 October 2020, the UAE government made various changes to the UAE Bankruptcy Law*, including the concept of Emergency Financial Crisis (EFC). Subsequently, on 10 January 2021, the UAE Cabinet declared the existence of an EFC in the UAE. In this article, Partners Michael Morris and Keith Hutchison explore how this declaration may impact on debtors and creditors.
Emergency Financial Crisis
One of the key changes implemented was a power given to the UAE Cabinet to declare an EFC. An EFC is defined as:
Recent court service suspensions announced in the UAE – albeit temporary – as part of the government's response to COVID-19 will undoubtedly have an impact on efficacy of debt recovery options available to creditors, at least in the near short term. These measures come at a time when payment default rates are only expected to increase rapidly and creditors will be looking at what actions they can and should take to protect their position, including short and medium term strategies.
The true effects of the events of the last few days have yet to be seen. With the mainstream political parties acting like participants in a ‘Compose a Greek Tragedy’ competition, a government unlikely to exercise any meaningful executive functions until autumn (at least), the currency and financial markets in turmoil and the future uncertain on a range of factors, it is tempting to succumb to a condition of inaction whilst waiting to see how the cards fall.