The UAE is in the process of implementing a new bankruptcy law.

The new bankruptcy law is intended to create a more modern, debtor-friendly regime, with particular emphasis on the rescue of a distressed debtor’s existing business or the restructuring of the debtor’s liabilities, rather than formal liquidation or bankruptcy. The new law will be equivalent of Chapter 11 of US bankruptcy laws. Read more about the UAE’s new bankruptcy law.

The onset of the global financial crisis brought into focus the extent to which the UAE’s business and economic landscape had changed. In order to continue to grow and protect existing investment, whilst also continuing to encourage new investment, the UAE Government recognised that various steps would need to be taken. In particular, legislative reform would be required in certain key areas.

On August 28, 2012, the Special Tribunal related to Dubai World (the “Tribunal”) formally approved the restructuring of more than US$2 billion of debt of Drydocks World LLC and Drydocks World – Dubai LLC (together, “Drydocks”) under a syndicated term loan facility and separate hedging agreements, in the first restructuring approved under Dubai Decree No.

Employees’ rights in bankruptcy in the UAE On the face of it, employees’ rights in the UAE seem to be well protected by the bankruptcy laws. Under Article 713(1) of Federal Law No. 18 of 1993 (Commercial Transactions Law), the wages and salaries of workers that have become due 30 days prior to the adjudication of bankruptcy may be paid on a super-priority level (“regardless of any other debt”) by the bankruptcy trustee. However, there is some uncertainty as to whether employees would be paid before secured creditors as the bankruptcy laws remain largely untested in the UAE courts.

This article is a case study on how the UAE, a country with two cities which are significant international financial and business centres (namely Dubai and Abu Dhabi), functions without effective insolvency laws; and why this state of affairs is likely to continue for some time.

Whilst it is not strictly true that the UAE has no insolvency laws at all, it is fair to say that no one (debtors or creditors) makes use of the existing laws. A new UAE insolvency law has been drafted, but in the writer’s view it will be years before it sees the light.

OW Bunker, one of the world’s major bunker suppliers and traders, and one of the largest companies in Denmark in terms of revenue, has filed for in-court restructuring for major parts of its business.

The subsidiaries involved face insolvency following the uncovering a $125m fraud in Singapore and a $150m risk management loss.

On 14 December 2014 the DIFC Law No. 2 of 2014, or the “Netting Law of 2014” (the “Law”), came into force as a law in the Dubai International Financial Centre (“DIFC”) following its enactment on 7 December 2014 by His Highness Mohammed bin Rashid Al Maktoum, Ruler of Dubai.

Introduction

On 15 June 2015, the Abu Dhabi Global Market (Global Market), Abu Dhabi’s financial free zone, published the following six new regulations concerning the regulation of non-financial services in the Global Market:

The ADGM was established in Abu Dhabi in 2013. However, the ADGM has only recently (on 15 June 2015) published its first set of commercial rules and regulations for non-financial services (the Regulations) relating to companies, insolvency, employment and real property and strata title. It is also expected to publish regulations for financial services later this year. ADGM’s intentions are clear.

There is a wide range of precautionary attachment options in the UAE which creditors in the region should take into account.