Given the absence of any mandatory set-off rights on insolvency in the current UAE Bankruptcy Law, the application and effectiveness of netting provisions in financial market contracts made with a UAE counterparty has historically been uncertain.
On May 30, 2019, Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, signed DIFC Insolvency Law, Law No. 1 of 2019 (the “New Insolvency Law”) into law, thereby repealing and replacing DIFC Law No. 3 of 2009. The New Insolvency Law, and supporting regulations (the “Regulations”), became effective on June 13, 2019, and govern companies operating in the Dubai International Financial Centre (the “DIFC”).
The DIFC has introduced a new Insolvency Law (Law No. 1 of 2019) (‘New Insolvency Law’) as a means of enhancing and facilitating a more efficient and effective bankruptcy regime within the free zone. The New Insolvency Law was enacted on 30 May 2019 and came into force on 6 June 2019.
Rather than a wholesale overhaul of the existing law, new concepts have been introduced to provide debtors and creditors a larger toolkit to deal with insolvency situations. We examine three of these new concepts below.
1. Debtor in Possession Regime – Rehabilitation
The UAE Government recently passed legislation that substantially simplifies the procedure for obtaining a payment order.
Payment orders may offer an efficient method to obtain ex parte judgement against a debtor. They are frequently used when claiming amounts arising from bounced checks or other commercial instruments.
In March of 2019, an Emirati limited liability company (the “LLC”) had restructured its debts under the Bankruptcy Law; Federal Decree-Law No. 9 of 2016 which was first published in the Official Gazette on 29 September 2016 and came into force on 29 December 2016.
Under Chapter 4 of the Bankruptcy Law the Bankruptcy Circuit of the Abu Dhabi Primary Court oversaw the restructuring of the LLC under which had been operating in the contracting industry since 2008 and had debts exceeding eighteen times its paid-up capital.
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When Hanjin Shipping went into administration in late 2016, reportedly over 500,000 containers were stranded or arrested at ports worldwide, including many in the Middle East. Cargo owners who find themselves in such circumstances can be critically affected (particularly if the cargo is temperature sensitive, perishable or urgently required), and they will often look to their cargo insurers. This note highlights a number of issues which are likely to arise when a carrier becomes insolvent during a laden voyage, and claims are made under a marine cargo policy in the UAE.
The much-awaited new bankruptcy law in the United Arab Emirates is a complete legal framework designed to help financially troubled companies to avoid collapse. The new law took effect on December 29 2016 after being decreed by President Sheikh Khalifa. It is part of the global wave of insolvency reform referred to as the 'rescue culture' and has been warmly received by local and international stakeholders. Although it has yet to be tested in practice by the courts, it is a move in the right direction.
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.
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