2016 is expected to be a challenging year for UAE businesses, as the impact of lower oil prices, regional geopolitical concerns, and reduced investor appetite for emerging markets more generally impacts on sentiment.
From a legal perspective, this economic environment is likely to have a knock on effect for the federal laws and regulatory changes that come through the pipeline – and of course it will partly determine the pace of any announcements.
Depending on how severe the macro-economic climate gets, the focus will be on laws and regulations that deal with liquidation, bankruptcy and defaults. And there will be a renewed urgency to ensure that the economy remains stable and continues to grow. That said there are also likely to be laws introduced that logically follow from what has already been introduced over recent years.
The UAE Commercial Companies Law, which was issued in 2015, will boost investment and diversification by moving corporate regulation closer to international standards. The UAE Bankruptcy and Investment Laws are expected to be issued on the back of it next year. These two critical laws, along with around 10 regulations aimed at enhancing corporate governance and share option schemes for IPOs, will supplement and complement the Commercial Companies Law as well as new banking laws.
The UAE Bankruptcy Law is expected to deal with the liquidation and voluntary bankruptcy of companies, and it may even change the official position on bounced cheques. The criminal implication of bouncing a cheque, which can include arrest and a jail sentence, is one of the main reasons why people flee the country when they are unable to pay their debts.
A more challenging 2016 also comes with the expectation of increased litigation and arbitration. But the status quo around the UAE’s local and offshore DIFC courts is evolving and will continue to do so. Recently, the local courts have seen an uptick in cases registered and have taken measures to improve the quality, efficiency and reliability of their legal and judicial services. The DIFC Courts are also a prominent feature of the legal landscape in Dubai and the expansion of their jurisdiction – enabling them to hear lawsuits where a government entity is party – has made them even more accessible.
Leaving the uncertain economic backdrop to one side, there are numerous other financial-sector-related regulatory and legal changes predicted for a roll out in 2016, including a new law impacting on how banks and financial institutions are supervised by the UAE Central Bank, and how non-regulated banks and financial institutions can market their products. We will also see the Abu Dhabi Global Market start licensing and partnering with other private and public sector entities, adding another important financial centre to the UAE’s already strong offering.
In addition, towards the back end of 2015, a short consultation was held on a number of amendments to existing funds regulations. We anticipate more movement in this area during 2016, with particular attention paid to the specific requirements of exchange traded funds (ETFs) and REITs.
The issue of Intellectual property rights is also tipped to be a big feature of the legal landscape next year. After the Government announced 2015 as the year of innovation, a proper legal platform was introduced within the new Companies Law amendments, which allowed for the establishment of holding companies that can own IP rights. In the past local IP owners had to register companies offshore to hold ownership of IP rights. We also expect to see more administrative measures that allow local authorities within the Emirates to cancel conflicting trade names with pre-existing trademarks, which will benefit the brand owners to enforce their rights promptly and without having to refer to a court.
Against the backdrop of a challenging economic environment, there is no doubt 2016 will be a busy year for the UAE legal industry. Many new laws and regulations are slated for introduction, although a number of these reflect the natural evolution and development of the country’s legal framework. However, one of the biggest unknowns about the year ahead, is how much legal change will be the direct result of deteriorating economic conditions and business sentiment. Hopefully this scenario will not become a reality but we should not be surprised by it.
Husam Hourani, Managing Partner at Al Tamimi & Company
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