The UAE Cabinet issued Resolution (“Resolution”) no. 4 of 2018 Forming the Financial Restructuring Committee (“FRC”) pursuant to UAE Federal Law No. 9 of 2016 (“Bankruptcy Law”).

In this article, we will highlight the important developments brought by the Resolution, especially in respect of Financial Restructuring of Financial Institutions and the introduction of bankruptcy searches to the UAE.

In follow-up to our March 2017 Law Update article, ‘UAE Court Dismisses Physical Bunker Supplier Claim Against Ship Owner’, this article provides an overview of the subsequent determination of the UAE Union Supreme Court’s judgment (Appeal 655 for the year of 2016 / Commercial) in relation to the bunkering matter.

The UAE government issued a new bankruptcy law, UAE Federal Decree Law No. 9 of 2016 (“Bankruptcy Law”) which came into force on 29 December 2016.

The introduction of the Bankruptcy Law is regarded as an important step towards bringing more clarity to the UAE’s insolvency regime. The Bankruptcy Law outlined a more modernized approach to company restructuring and insolvency management.

It has been a busy time for legislators in the United Arab Emirates (“UAE”), with the introduction of many new laws and regulations which impact the financial services industry.

This article looks back on recent developments and attempts to predict what else may be enacted during 2017.

Centre for Amicable Settlement of Disputes

The new UAE Bankruptcy Law (Federal Decree Law No. 9 of 2016) came into force as a response to the 2008 global financial crisis. The new law was designed to encourage the development of a “rescue culture”, and replaces Volume 5 of Federal Law No. 18 of 1993 on the Commercial Transactions Law.

The slowdown in the UAE economy has resulted in a corresponding slowdown in loan growth for the UAE banks and some debt delinquencies, especially in the SME market, and that has lead in some cases to a drop in bank profits as a result of increased bad debt provisions. While we understand that contractors who were the first to be affected have largely already made arrangements, that still leaves many bank customers who are feeling the stress of making scheduled loan repayments when their own profitability and cashflows are coming under pressure.

A declaration of bankruptcy, according to Article 645 of the Commercial Transactions Law, can be imposed on any trader who ceases to pay some or all of its commercial debts. While a debtor’s cessation of payment is a presumption against him, the trader might not be considered bankrupt if the failure to pay is due to a dispute regarding the debt. In other words, it is important to prove that the debtor ceased to pay a certain commercial debt due to financial distress and credit issues.

The proposed changes to the Saudi Arabian bankruptcy regime will provide the judiciary the right to obligate creditors to accept a settlement proposed by the debtor (the “new Law”).

The Ministry of Commerce and Investment is currently in the latter stages of reforming the Kingdom’s bankruptcy laws and regulations. The new Law is intended to replace certain sections in the Commercial Court Law and the Bankruptcy Protecting Settlement Law dealing with bankruptcy.

In these challenging economic times, some businesses are struggling to cope with financial pressures and financiers are concerned with their customers’ ability to service their financing arrangements. An effective insolvency regime is, therefore, an important element of financial system stability. The statutory insolvency regime in the United Arab Emirates (“UAE”) has often been regarded as under-developed and remains largely untested.

In a landmark legal development, a judgment of the DIFC Courts has been recognised and enforced for the first time in a Western jurisdiction.

The Supreme Court of New South Wales, Australia, issued an order recognising and enforcing the DIFC Courts judgment issued by Justice Sir Richard Field in Legatum Limited v Arif Salim (CFI 027/2014).