Author: afridi-angell

Further measures implemented by the UAE authorities in response to COVID-19

The UAE continues to implement new measures on a daily basis to curb the spread of COVID-19. Those measures are being adopted, announced and implemented at a very rapid pace. For ease of reference, we present here a summary of the key measures that have been implemented by various UAE authorities between 18 March 2020 and the time of this inBrief, 9:00 a.m. on Friday, 3 April 2020.

 

Remote Working System

 

Government:

 

The Federal Authority for Government Human Resources (FAHR) has activated the remote working system for all governmental authorities with effect from 29 March 2020, such that a maximum of 30% of the total workforce are physically present in the premises.

 

It has therefore become a new norm for UAE governmental authorities to close its doors to the public and adopt (if such means were not available already) electronic means for receiving applications of, and processing, governmental services. For instance, the UAE Ministry of Foreign Affairs and International Cooperation (MOFA) no longer accepts physical submissions of documents to be attested. Such attestation services must now be applied for online, and Emirates Post will arrange the delivery of documents between the applicant and MOFA.

 

Inquiries to governmental authorities are now generally by phone call or emails. Where governmental officials are required to witness signatures, the common practice is the use of video conferencing (as is the case for DIFC Wills Service Centre for the execution of wills, and the Abu Dhabi Judicial Department, for the notarisation of documents).

 

This FAHR restriction however does not apply to certain sectors, such as (but not limited to) energy, telecommunications, health, security, postal services, and identity and citizenship.

 

Private Sector:

 

The Ministry of Human Resources and Emiratisation (MOHRE) promulgated Ministerial Resolution 281 of 2020 regulating the Remote Work in Private Establishments during the Period of Application of Precautionary Measures to Curb the Spread of Novel Coronavirus, which sets out guidelines that private entities must adhere to. Such guidelines include (among others):

 

• ensuring that a maximum of 30% of the total employees are physically present at the workplace and applying remote working system to all employees that are not required to be physically present at the workplace;

• restricting customers to 30% of the total seating capacity;

• having screening devices at the entrance to take the temperature and check symptoms of employees on a daily basis twice (when entering the premises and when exiting the premises); and

• the requirement for private entities to report any workers with COVID-19 or suspected cases.

 

Similarly, pursuant to Circular 14 of 2020 issued by the Abu Dhabi Global Market (ADGM), ADGM – registered entities are required to ensure that a maximum of 30% of the total employees are physically present at the workplace and apply remote working system to all employees that are not required to be physically present at the workplace. Certain businesses however are exempt from this restriction, which include (among others): supermarkets, grocery stores, pharmacies, hospitality and food establishments (delivery only) and cleaning services.

 

Notwithstanding MOHRE’s resolution above, the Dubai Department of Economic Development (DDED) has directed that all private entities implement remote working system for 80% of the total employees until 9 April 2020, which DIFC, JAFZA and DMCC free zones have also required of their respective registered entities.

 

Penalties

 

To curb the spread of COVID-19, the UAE authorities have promulgated laws, and issued official statements, clarifying the penalties for those who do not comply with the preventative measures imposed by the concerned authorities.

 

Cabinet Resolution 17 of 2020 requires a person to not violate such preventative measures. Article 2 of this Cabinet Resolution authorizes the UAE Ministry of Interior and the Police (among others) to ensure that the public complies with such measures and apprehend violators.

 

Violators will be subject to penalties set out in Attorney General Resolution 38 of 2020, Cabinet Resolution 17 of 2020, Federal Law 14 of 2014 on Combating Communicable Diseases (as COVID-19 is declared by the UAE Ministry of Justice to be a communicable disease), and any other law which may be applicable.

 

To date, the Dubai Police has arrested a European national for posting a video that defied UAE authorities’ instructions for social distancing. This case has been referred to the Federal Public Prosecution for Information Technology Crimes.

 

Furthermore, the UAE authorities have been targeting entities that have taken advantage of the COVID-19 situation and carried out business practices to the detriment of the consumers.

 

The DDED has so far issued 35 warnings, nine violation notices on shops, fines on nine pharmacies and two pharmaceutical suppliers for inflating the prices of products (such as hand sanitizers, masks and detergent products).

 

Based on the results from accredited lab tests conducted on 102 samples of hand sanitizers, the Dubai Municipality has withdrawn six hand sanitizers from the market after discovering that they were not compliant with the approved specifications.

 

The Abu Dhabi Department of Economic Development (ADDED) has issued a decision to take disciplinary actions against companies that increased the prices of food and medical equipment without justification. Such actions include (amongst others) imposing a fine of AED 250,000 (for the first violation) to AED 2 million (for repeated violations), temporarily closing down violating facilities, as well as temporarily and permanently suspending licenses.

 

Labour-Related Matters

 

To provide some relief for employers facing diminishing revenues, MOHRE promulgated Ministerial Resolution 279 of 2020 on Employment Stability in Private Sector during the Period of Application of Precautionary Measures to Curb the Spread of Novel Coronavirus. This resolution details a number of measures which employers in the private sector may progressively resort to during the current period, and only applies to employers registered with MOHRE with respect to their non-UAE national employees. Measures that are permitted by the Resolutions are: working remotely, paid leave, unpaid leave, temporary salary reduction during the relevant period; permanent salary reduction. An employer with a surplus of non-UAE national employees may register the details of these employees in an online Virtual Labour Market maintained by the MOHRE to inform potential employers of their availability.

 

UAE citizens in the private sector that are affected by the COVID-19 situation will be subject to Ministerial Resolution 280 of 2020 establishing the Committee concerned with the Stability of the Situation of UAE Citizens in the Private Sector, also promulgated by the MOHRE. The Committee shall develop a set of support packages to ensure that UAE citizens remain in the labour market. It will also examine termination cases between UAE citizens and their employers received by the Customer Happiness Centres to determine an appropriate support mechanism for such UAE citizens.

 

Functioning of the Courts

 

It appears that the Execution Court in Abu Dhabi will suspend eviction actions, attachment of bank accounts, and other specific measures for two months. This appears to be a move designed to give temporary relief to debtors.

 

Travel Restrictions

 

The entry of all of valid UAE visa holders currently outside of the UAE shall remain suspended for a further renewable period of two weeks from 2 April 2020.

 

All inbound and outbound passenger flights and transit of airline passengers in the UAE remain suspended. In spite of these restrictions, on 2 April 2020, Emirates Airlines have received approval to fly passengers outbound from the UAE to certain destinations from 6 April 2020. Initial flights are to commence from Dubai to London (Heathrow), Frankfurt, Paris, Zurich and Brussels.

 

Visa-Related Matters

 

The UAE Cabinet has approved the extension of residence permits expiring on 1 March 2020, for a renewable period of three months without any additional fees upon renewal. The Cabinet has also waived the administrative fines associated with the infractions relating to services provided by the Federal Authority of Identity and Citizenship (FAIC) for a renewable period of three months, with effect from 1 April 2020.

 

The UAE Ministry of Health and Prevention (MOHAP), MOHRE and FAIC have exempted employees with expired work permits from carrying out medical tests in order to renew their UAE work permits and residence visas.

 

DIFC:

 

At present, original passports will not be required for the visa application, visa renewal and visa cancellation process as UAE residence visas will not be stamped on applicant’s passports.

 

DMCC:

 

• DMCC Authority has de-activated the option to apply for a visa outside the country.

• For the purpose of visa cancellation, original passports will no longer be required for employees who are outside the UAE for more than three months, outside the UAE with an expired visa or inside the UAE.

 

Economic Stimulus

 

Various stimulus packages have been announced to alleviate businesses in the UAE to date:

 

1. HH Sheikh Mohammed Al Maktoum approved an additional AED 16 billion stimulus package, raising the total to AED 126 billion.

2. As of 25 March 2020, the UAE Cabinet approved the following measures (among others) that seek to alleviate retail, hotel and industrial sectors:

• Reduction of water and electricity bill of shopping malls, commercial shops, hotels, hotel apartments and plants by 20% for a period of 3 months starting from April 2020, which would amount to AED 86 million.

• Deferred payments for paying water and electricity connection installation fees up to six months.

• A waiver of 20% of the electricity connection fees for a period of three months from April 2020.

 

3. The UAE Central Bank has launched a comprehensive Targeted Economic Support Scheme of AED 100 billion (TESS) to contain the repercussion of COVID-19, with immediate effect. The purpose of TESS is to provide temporary relief from payments of principal and interest on outstanding loans for all companies and retail customers in the UAE affected by COVID-19.

 

4. The ADDED has recently waived the payment of fines for violations committed by entities registered in Abu Dhabi amounting to AED 246,653,900. Such fines are fees associated with carrying out economic activities such as (but not limited to): late license renewal fees, penalties for non-compliance with terms and conditions of a facility, penalties for carrying out activities outside the scope of the licensed activity.

 

5. The DMCC has announced the roll-out of a Business Support Package to support DMCC-registered entities, with effect from 1 April 2020. The Package will apply until 30 June 2020 (unless stated otherwise) and shall include (among others):

 

• 100% waiver for late license renewal penalties;

• 100% waiver of all penalties imposed in relation to Flexi Desk and DMCC Business Centre (applicable until the end of 2020); and

• 30% discount on license renewal fees.

 

6. The DIFC will introduce a series of fiscal easing initiatives over the next three months from 1 April 2020 to 30 June 2020, such as (but not limited to):

 

• Waiver of annual licensing fees on new registrations during the next three months.

• 10% discount of renewal fees for existing license holders in the DIFC that are due for license renewal between 1 April 2020 to 30 June 2020.

• Deferred payments for all properties owned by DIFC Investments Ltd for a period up to six months from 1 April 2020.

 

Measures were also taken by developers to alleviate costs associated with real estate, such as deferring or waiving lease payment and waiving administrative fines. To date, Nakheel, Al Zarooni Group and Wasl Asset Management Group have implemented relief measures for their customers.

 

Sterilisation

 

MOHAP has implemented the National Disinfection Programme, with effect from 26 March 2020 and ending on 5 April 2020 (unless stated otherwise). Sterilisation has been taking place in public areas from 8pm to 6am the following day (the Sterilisation Period). The public is urged to stay home during this period; individuals can only leave their homes if:

 

(i) it is absolutely necessary to buy essential supplies, such as food and medicine (Essential Tasks), or

(ii) they work in vital sectors, such as (among others) energy, telecommunications, health, security, law enforcement,

 

and will have their personal and work ID verified and checked.

 

Restrictions and Temporary Suspension on Businesses

 

The temporary suspension on certain businesses remain, which include (among others) commercial centres, shopping malls, restaurants and cafes (except takeaway services), gyms, etc. However, online stores and e-commerce options can remain operational.

 

Food retail outlets (such as supermarkets, cooperatives, grocery stores) and pharmacies, bakeries, car workshops, laundries, technical and electrical service providers, food delivery and transport services, and banks can remain open. These businesses are required to place clear signage on the floor to ensure that individuals stand 1.5 metres apart.

 

****

 

As stated above, new measures are expected to continue to be adopted, announced and implemented at a very rapid pace. Afridi & Angell has been following and will continue to follow official sources for further updates.■

 

Relief for employers during Covid-19 epidemic

Many employers are facing diminishing revenues during the current Covid-19 epidemic. Many of those employers also face the need to reduce overhead.

 

To provide some relief for employers, the Minister of Human Resources and Emiratisation promulgated Ministerial Resolution No. 279 of 2020 (the “Resolution”) on Employment Stability in Private Sector during the Period of Application of Precautionary Measures to Curb the Spread of Novel Coronavirus. The Resolution was promulgated on 26 March 2020 and took effect on the same date.

 

The Resolution details a number of measures which employers in the private sector may progressively resort to during the current period. The measures apply only to employers who are registered with the Ministry of Human Resources and Emiratisation (the “Ministry”) and for their non-UAE national employees. The scheduling of paid leave can be done unilaterally by the employer, but the other measures are to be taken with the agreement of the affected employees.

 

The specific measures that are permitted by the Resolution are:

 

• working remotely

• paid leave

• unpaid leave

• temporary salary reduction during the relevant period

• permanent salary reduction

 

An employer that wishes to temporarily reduce the salary of a non-national employee must prepare a temporary supplement to the employment contract which would be signed by both the employer and the employee. The Ministry will promulgate a template for such supplement. The supplement must be notified to the Ministry upon the Ministry’s request.

 

An employer that wishes to permanently reduce salary of a non-national employee must prepare an amendment to the employment contract details using the Ministry’s online portal.

 

An employer who has a surplus of non-UAE national employees may register the details of those employees in an online Virtual Labour Market maintained by the Ministry, to inform other potential employers of their availability. During the Corona virus epidemic, it has become impossible to recruit employees from overseas, meaning that new hiring must rely on the local labour market.

 

The employer who serves as sponsor of an affected employee must maintain the sponsorship, accommodation and other entitlements of the employee until the employee’s sponsorship is cancelled or transferred to another employer. Non-national employees present in the UAE and seeking job opportunities may register on the Virtual Labour Market and apply for vacancies posted by the registered employers.

 

The measures detailed in the Resolution are available only to employers who are registered with the Ministry, which means that employers in the many free zones of the UAE are not covered. The Resolution will remain in effect only as long as the Corona virus crisis continues, the duration of which remains uncertain. ■

 

Compliance with official measures to combat COVID-19 made mandatory

Significant responsibility for ensuring compliance with directives to stop the spread of the Covid-19 virus has been delegated to the law enforcement authorities of the UAE. Last week, the Cabinet promulgated Resolution No. 17 of 2020, requiring all natural and juristic persons to comply with the measures mandated by the concerned authorities to combat Covid-19. The Resolution moreover states that failure to comply would be treated as a violation of law exposing the offender to penalties, including responsibility to bear the costs of any remedial measures, closure of premises, and fines. Investigations and prosecutions are assigned to a bureau in the Federal Ministry of Interior that was created last year by Resolution No. 73 of 2019 of the Minister of Interior on the Establishment of the Federal Prosecution for National Emergency, Crisis and Disasters. Finally, Resolution No. 17 of 2020 delegates to the Attorney General the power to determine the relevant violations and fines.

 

The UAE Attorney General published that list of violations and fines on Thursday, 26 March 2020, in the form of Resolution No. 38 of 2020.

 

The Resolution, taking effect from the date of its promulgation, provides for the following fines:

 

No.

        Violation Fine

1
  • Violating an order for mandatary hospitalisation.
 AED 50,000

2
  • Failing to abide by home quarantine or re-testing instructions.
 AED 50,000

3
  • Failing to close an educational institution, movie theatre, gym, nightclub, commercial center, outdoor market, park, leisure centre, cafe, shopping mall, restaurant or the like, or receiving any visitors in any of such facilities in violation of the instructions.
  • Failing to adhere to measures for the opening of public parks, beaches, gyms, public swimming pools, and hotel swimming pools.
  • Failing to temporarily suspend sailing cruises.
 AED 50,000 for whoever is in  charge of the facility, closure of the facility, and a fine of AED 500 for each visitor

4
  • Violating prohibitions or restrictions on gatherings, meetings, private and public celebrations, and on gathering or being present at public locations, private farms, or agricultural estates.
 AED 10,000 for whoever invites or organises the same, and AED 5,000 for participants

5
  • Violating measures of the Ministry of Health & Prevention regarding those coming to the UAE from countries infected by any communicable diseases.
 AED 2,000

6
  • Failing to take the appropriate health procedures regarding the regulation of markets, roads, and other public locations exempt from temporary closure.
  • Failing to implement an order for removal of any temporary structure or the disposal of goods, clothes, or other items are believed to have been contaminated or potentially contaminated with any disease agent and cannot be disinfected.
 AED 3,000

7
  • Failing to take precautionary measures for the crew of accommodation vessels.
 AED 10,000

8
  • Leaving home for unnecessary reasons, or for purposes other than work or the purchase of basic needs.
 AED 2,000

9
  • Violating the provisions of the Implementing Regulations for the Law on the Prevention of Communicable Diseases as regards the burial or transport of the body of any person who dies from a communicable disease.
 AED 3,000

10
  • Exceeding the maximum permitted number of passengers in a car by more than three persons.
 AED 1,000 for the vehicle’s driver

11
  • Failing to wear medical facemasks in closed places or failing to observe the safe distance between individuals.
 AED 10,000

12
  • Failing to take sterilisation procedures in means of public transport.
 AED 5,000

13
  • Approaching or going to healthcare facilities in cases other than the prescribed ones.
 AED 1,000

14
  • Refusing to undergo a medical test upon demand.
 AED 5,000

 

Over the weekend, the Ministry of Interior made a statement clarifying the requirement to wear a medical facemask, stating that it applied only to persons suffering from chronic illnesses or with flu symptoms.

 

The Resolution further provides that the penalty shall be doubled upon repetition of the violation, and that the violator shall be referred to the Federal Prosecution for National Emergency, Crisis and Disasters if the violation is committed for the third time. The Federal Prosecution for National Emergency, Crisis and Disasters is entrusted generally with the task of implementing the provisions of the Resolution, and of investigating and taking action in respect of all offenses under Federal Law No. 14 of 2014 on the Prevention of Communicable Diseases and its Implementing Regulations. ■

Further measures announced today by the UAE authorities in response to COVID-19

This serves as an update to the section “Restriction on Travel / Transportation” in our inBrief (Recent measures implemented by the UAE authorities in response to COVID-19) dated 18 March 2020.

 

The UAE Ministry of Foreign Affairs and International Cooperation (MOFA) has announced:

 

1. With effect from 01:00 (UAE time) on Thursday 19 March 2020, the temporary suspension on UAE entry visas now also applies to holders of passports from visa-exempt countries. The suspension on holders of passports from visa-exempt countries shall continue until a medical clearance process is activated in the country of departure. Diplomatic passport holders remain exempt from this suspension as of now.

 

2. With effect from 12:00 (UAE time) on Thursday 19 March 2020, holders of valid UAE visas currently outside of the UAE will not be able to enter the UAE for a renewable period of two weeks. They are requested to contact the UAE diplomatic missions in their current locations for the necessary support to facilitate their entry into the UAE. ■

 

DMCC Company Regulations 2020: Keeping up with international best practices

The Dubai Multi Commodities Centre (DMCC) Authority has recently issued new company regulations (the Company Regulations 2020). The Company Regulations 2020 came into effect on 2 January 2020 and they repeal and replace the previous DMCC Company Regulations 2003 (DMCC Regulation No. 1 of 2003, as amended by DMCC Regulation No. 1 of 2007, DMCC Regulation No. 1 of 2009 and DMCC Regulation No. 1 of 2013) (the Previous Company Regulations).

 

The Company Regulations 2020 provide for more clarity and flexibility for businesses wishing to conduct business in and from the DMCC. Note that Company Regulations 2020 are also applicable to branches of foreign companies established in the DMCC.

 

The Company Regulations 2020 expressly state that the provisions of Federal Law No. 2 of 2015 Concerning Commercial Companies (i.e. the Federal Companies Law applicable to mainland/onshore entities) do not apply to any DMCC company or branch in DMCC.

 

Transition and Compliance Requirements for Existing DMCC Companies

 

The Company Regulations 2020 do not impose an obligation on existing DMCC companies to take active steps for compliance unless their existing Articles of Association (Articles) are contrary to or inconsistent with the Company Regulations 2020. The Company Regulations 2020 allow the DMCC Authority to establish transitional provisions to facilitate the transition from the Previous Company Regulations (and any rule, regulation, policy or decision made under the Previous Company Regulations) to the Company Regulations 2020.

 

To the extent that the Articles of a DMCC company are contrary to, or inconsistent with the Company Regulations 2020, such a company must amend the non-compliant provisions by 2 January 2022 (being 24 months from the date the Company Regulations 2020 came into effect).

 

Important Changes in the Company Regulations 2020:

 

We have set out below an overview of the key changes and updates introduced by the Company Regulations 2020:

 

Articles of Association

 

Companies in the DMCC will now have more flexibility when drafting and adopting Articles. Under the Company Regulations 2020, DMCC companies have the following options when it comes to adopting Articles:

 

1) to adopt the template Articles prescribed by the Dubai Multi Commodities Centre Authority (DMCCA) (the Standard DMCC Articles);

2) to amend clauses of the Standard DMCC Articles; or

3) to adopt their own version of the Articles – provided that they meet the requirements as set out in the Company Regulations 2020.

 

If a DMCC company decides to adopt its own bespoke Articles, it must provide the Registrar of Companies (the Registrar) with a legal opinion that the new Articles do not contain any provisions which are contrary to or inconsistent with the Company Regulations 2020.

 

Furthermore, if at any time, the Registrar notifies a DMCC company that the Articles contain a provision deemed contrary to or inconsistent with the Company Regulations 2020, the said DMCC company must amend its Articles within a specified time frame and in such manner as the Registrar may direct.

 

It is important to point out that the Previous Company Regulations permitted minor amendments to the Standard DMCC Articles. However, amending the Standard DMCC Articles was not very common and shareholders of a DMCC company would often, along with the Standard DMCC Articles, generally rely on a separate shareholders’ agreement.

 

The ability to adopt bespoke Articles  may not have any benefit to a wholly owned subsidiary however if the DMCC company is a joint venture between two or more unrelated parties, adoption of  bespoke Articles can provide parties with an additional source of protection to ensure that the contractual provisions agreed to in their shareholders’ agreement are honored.

 

Share Classes

 

Companies in the DMCC will have the option to structure their shareholdings in the way that best suits their requirements. The Previous Company Regulations only allowed one class of shares. Under the Companies Regulations 2020, a DMCC company may issue different types or classes of shares, provided that the rights of each type or class of shares is stipulated in the Articles of the company.

 

Up until now, if parties wanted to prescribe different rights to shares (and therefore have more than one class of shares) their only option in the UAE was to look to the incorporation of a company in the Dubai International Financial Centre or the Abu Dhabi Global Market.

 

Issuance of different classes of shares is very common in other developed jurisdictions. Moreover, it is particularly relevant for start-up companies, as they require the ability to issue different classes of shares to founders and investors during various stages of their growth. With DMCC attracting more and more start-up companies, this will definitely be viewed as a positive development.

 

Share Capital Requirements

 

The Company Regulations 2020 have removed the AED 50,000 minimum share capital requirement.  Under the Company Regulations 2020, the incorporator may decide the share capital which is sufficient for the activities which it wishes to undertake pursuant to its license issued by the DMCCA. However, the Registrar may, from time to time, specify a minimum amount of share capital.

 

Although the minimum share capital requirement has been removed, practically, we may still see companies in DMCC and/or the Registrar using AED 50,000 as the benchmark for the share capital requirement as is the case onshore in the UAE.

 

In making this change, the DMCC has followed many other free zones in the UAE, such as the Jebel Ali Free Zone, which originally had minimum share capital requirement(s) (depending on the type of company).

 

Dormant Companies

 

The Companies Regulations 2020 introduces the concept of dormant companies. A DMCC company may request the Registrar to suspend its license for a period of up to 12 months or longer (as approved by the Registrar). A company whose license has been suspended by the Registrar must not conduct any business under the suspended license until such time the suspended license is reactivated.

 

The Registrar or the DMCCA has the authority to issue additional rules in respect of dormant companies.

 

If there are cost benefits (e.g. waiver from requirement(s) to pay the license fee or lease office space in the DMCC during the suspended period), DMCC companies which are going through financial difficulties or restructuring may consider requesting the Registrar to suspend its license.

 

Officeholders and Corporate Governance

 

Section 9 of the Company Regulations 2020 address corporate governance standards for officeholders by clarifying the roles and responsibilities of the director(s), the manager and the secretary of a DMCC company. Further, the DMCCA has also published Officer Rules which the directors, the manager and the secretary of a company are required to comply with.

 

While the director(s) and the manager must be natural persons, the Company Regulations 2020 provide that the secretary need not be a natural person, thus permitting the appointment of corporate service providers as the secretary of a company.

 

Among the changes in the Company Regulations 2020 is the introduction of provisions expressly dealing with the appointment of the company’s manager and a detailed explanation of his/her functions. A manager (whose name is mentioned on the company’s license) is viewed as the face/primary contact of the company. Most businesses rely on its manager to carry out day-to-day operations. Recognising the role of a manager and his/her responsibilities is a welcome introduction in the Company Regulations 2020.

 

The Previous Company Regulations provided that a DMCC company can have a maximum of six directors. The Company Regulations 2020 are silent on the maximum number of directors and state that the business and affairs of a DMCC company must be managed by one or more directors. Thus, the Articles of a DMCC company will have flexibility to determine the maximum number of directors.

 

It should also be noted that the Company Regulations 2020 prohibit a DMCC company from providing financial assistance to a director.

 

Audited Accounts

 

Under the Previous Company Regulations, a DMCC company was required to submit the auditor’s signed and stamped financial statement summary sheet and audited financial statements within 90 days after the end of each financial year. Many companies were unable to comply with this timeframe. The Companies Regulations 2020 provide a more reasonable timeframe (six months) within which a company is required to submit audited financial statements to the DMCCA.

 

Winding up

 

The Company Regulations 2020 have introduced detailed provisions on the winding up of a DMCC company. These provisions include situations wherein the DMCC company is undergoing a solvent winding-up, summary winding-up, insolvent winding up, or involuntary winding-up.

 

Additionally, the Company Regulations 2020 specifically state that the provisions of the Federal Law 9 of 2016 (the Federal Bankruptcy Law) shall be applicable to DMCC companies.

 

Transfer of Domicile/Jurisdiction

 

The Company Regulations 2020 have introduced the concept of transfer of domicile/jurisdiction of incorporation of a foreign company (i.e. a non-DMCC company) into the DMCC and transfer of domicile/jurisdiction of incorporation of a DMCC company into another jurisdiction. The transfer of domicile/jurisdiction regulations exists in some of the other free zones of the UAE.

 

Any foreign company who wishes to be incorporated in the DMCC and wishes to be regulated by laws as applicable to companies in the DMCC, may wish to transfer its current jurisdiction of incorporation (provided the laws of the current jurisdiction permit the transfer of domicile) to the DMCC (as the new jurisdiction of incorporation).

 

Conclusion

 

The Company Regulations 2020 have therefore introduced some welcomed changes to the features of companies incorporated in the DMCC.  All clients which have companies in the DMCC should review the company’s Articles to ensure compliance with the Companies Regulations 2020 prior to the end of the transitional period. ■

Recent measures implemented by the UAE authorities in response to COVID-19

The UAE authorities have been dynamic in implementing measures to control the spread of COVID-19 within the UAE. Please find below a non-exhaustive list of noteworthy measures that have been implemented by various UAE authorities to date.

 

Preventive Guidelines 

 

UAE Ministry of Health and Prevention (MOH): MOH has set up guidelines on preventive measures, as well as contact centres for medical support or inquiries on the coronavirus at the Department of Health, MOH and the Dubai Health Authority (DHA).

 

Remote Working System

 

The Dubai Executive Council: On 15 March 2020, the Executive Council issued a letter to Dubai authorities on the implementation of a remote working system with effect from 17 March until further notice. This letter sets out rules (among others) on how services are to be handled or prioritized, the required percentage of employees to work remotely, the requirement for all government employees to abide by the standards and controls approved by the Dubai Electronic Security Centre and that any suspension of services must be announced publicly with prior coordination with the Government of Dubai Media Office.

 

In compliance with the letter, certain authorities have implemented the remote working system with others to follow suit shortly. The noteworthy authorities that have implemented the remote working system are:

 

1. Dubai Courts:

 

• As of 17 March 2020, the Case Management Department has closed all doors to the public. To prepare a case before the Dubai Courts, individuals must now contact the Case Management Department via a BOTIM app, phone call or email.

• Pursuant to Resolution 30 of 2020 issued by the Dubai Courts dated 17 March 2020, all court hearings before the Court of Cassation, Court of Appeal and Court of First Instance will be postponed, and issuance of certificates and personal status documents will be suspended, from 22 March 2020 to 16 April 2020. The Dubai Courts will however continue to hear temporary and urgent matters, as well as criminal cases and appeals that relate to detainees. Courts will no longer accept claims and applications unless they are submitted electronically.

 

2. DIFC Courts:

 

• The DIFC Court and Registry Offices have also closed its doors to the public from 17 March 2020 until 26 April 2020 (or pending further notice), and will operate on a (generally) completely remote basis. Inquiries, urgent queries and applications must be made by email or telephone.

• Generally, hearings before the Court of First Instance and the Small Claims Tribunal will be done via teleconference (unless agreed otherwise).

• The pro bono clinic, DIFC Court’s library and other rooms shall be temporarily closed.

• Probate appointments will be suspended until 26 April 2020 or pending further notice.

 

3. The Federal Authority for Identity and Citizenship: Smart services are set up so that certain applications can be done online (e.g., renewal of Emirates ID cards and existing UAE residence visas) to reduce the number of visitors.

 

Distance Learning

 

Knowledge and Human Development Authority (KHDA): Pursuant to a Circular issued by the KHDA dated 8 March 2020, no students are permitted on the school premises from 8 March 2020 to 4 April 2020. Schools are required to implement distance learning from 22 March 2020.

 

Restrictions or Temporary Suspension on Businesses 

 

Dubai Municipality (DM):

 

• The DM issued multiple circulars on 11 March 2020 requiring various businesses to increase the frequency of cleaning and disinfection, to ensure the availability of hand sanitizers and hand soap and to document all cleaning and disinfection operations and to list the disinfectants used. Such businesses include (among others): schools, salons, residential buildings, hotels, malls, gyms. Since then, the DM has issued further circulars specifically addressing salons, restaurants and food delivery service providers with restrictions on operations, such as permanently closing the waiting areas of salons and restaurants, and requiring food delivery service providers to register their food delivery and transportation with DM’s FOODWATCH platform.

• In conjunction with the Dubai Department of Economic Development (DDED), the DM imposed a shisha ban on cafes. As of 17 March 2020, DM has closed nine cafes for violating this ban.

 

DDED:

 

• Pursuant to a circular posted on a social media site of the Government of Dubai Media Office, the DDED temporarily suspended all cinemas, theme parks, game centres, massage parlours and spas until the end of March 2020.

• The DDED Consumer Protection Department has directed retailers to ensure that retailers sell detergent products and sanitizers at normal prices. To date, it has inspected 203 commercial outlets, issued 35 warnings and nine violation notices to shops that were found to have increased prices for these products.

 

Dubai Culture and Arts Authority: Operations at museums, historical sites and public libraries are temporarily suspended until the end of March.

 

Department of Tourism and Commerce Marketing: Operations at

entertainment venues, hospitality establishments, wedding halls, theme parks, sea cruises, desert camps, tours (safaris) and floating restaurants are temporarily suspended until the end of March.

 

Abu Dhabi Department of Economic Development (ADDED): Pursuant to circulars issued by the ADDED, operations at entertainment game halls and cinemas are temporarily suspended. Similar to the DDED, shishas are also temporarily suspended from being served at restaurants and coffee shops. The Government of Abu Dhabi Media Office further provides that the main touristic attractions, theme parks and cultural destinations (such as the Louvre and the Presidential Palace) shall also be temporarily closed until the end of March.

 

Abu Dhabi Ports: As of 14 March 2020, cruise operations are suspended for all ships at Abu Dhabi Cruise Terminal in Zayed Port and Sir Bani Yas Cruise Beach until further notice.

 

Abu Dhabi Department of Culture and Tourism: Pursuant to a circular dated 13 March 2020, all events and operation of night clubs are temporarily suspended until the end of March.

 

Restriction on Travel / Transportation

 

UAE Ministry of Foreign Affairs and International Cooperation (MOFA):

 

There is currently:

 

• a travel ban on Iran, Thailand, Qatar and Karabakh Mountainous Region; and

• travel warnings with respect to China, Lebanon, Madagascar, Congo, Yemen and South Sudan.

 

Federal Transport Authority (FTA):

 

• Ferry services to and from Iran are suspended until further notice.

• Ship masters must: (i) send health declarations, along with an undertaking that no crew member is suffering from COVID-19, to UAE port authorities 72 hours prior to arriving in the UAE irrespective of the last port of call, and (ii) report any suspected cases on the vessel (whether during the vessel stay or anchorage at the berth) to the FTA and the relevant UAE health authority.

 

Dubai and Abu Dhabi International Airports:

 

Effective as of 17 March 2020 (until further notice), the issuance of UAE entry visas is temporarily suspended. This suspension however does not apply to individuals with diplomatic passports or passports from visa-exempt countries that are entitled to visas on arrival. Flights to and from certain countries (e.g., Saudi Arabia, Bahrain, Lebanon, Syria and Turkey) have been temporarily suspended.

 

As per the Dubai International Airport’s recent alert, all passengers will be required to go through a non-intrusive thermal screening process. Passengers from any of the following countries will undergo both thermal screening and a nasal swab carried out by the DHA’s medical team based at the airport: Egypt, Italy (Rome only), China (Beijing only) and Thailand. As per a video tutorial prepared by the Government of Dubai Media Office, passengers with a high body temperature will be sent to hospitals (and a medical swab will be taken for a lab test). If a passenger tests positive for COVID-19, the passenger will be required to stay at the quarantine facility until the passenger tests negative for COVID-19. This quarantine period is likely to take a few weeks. The DHA will also arrange for individuals that have been in contact with the affected person to be screened (and if required, quarantined) as well.

 

As per the Abu Dhabi International Airport’s recent alert, all passengers would be required to go through an advance polymerase chain reaction (PCR) testing at the airport, then self-isolate for four days. Following the four-day isolation period, the passengers will then be required to undertake another PCR test.

 

Economic Stimulus

 

The Dubai Crown Prince and Executive Council Chairman has launched an AED 1.5 billion stimulus package to support Dubai’s business sector over the next three months. This stimulus is anticipated to result in the following (among others):

 

• freezing the market fees levied on facilities operating in Dubai;

• reduction of license renewal fees or by permitting onshore entities to renew their licenses without renewing their lease contracts;

• reduction of municipality fees imposed on sales at hotels;

• exemption of charges incurred from the cancellation or postponement of events; and

• reduction of the water and electricity bill by 10% for Dubai residents for the next three months.

 

* * *

 

As stated above, new measures have been, and are expected to continue to be, introduced and implemented in very short notice. Afridi & Angell has been following and will continue to follow official sources for further updates and notices. ■

 

 

Banking Regulation (UAE chapter), Lexology Getting The Deal Through

This volume in the Getting the Deal Through series provides an overview of the regulations governing the banking industry and comparative analysis of key issues. Topics covered include: regulatory framework, supervision and enforcement, capital requirements, ownership, restrictions and implications and changes in control.

Interim relief prior to starting arbitrations under the Federal Arbitration Law: A note on recent experiences

 

Afridi & Angell was recently successful in obtaining interim orders from the Dubai Courts attaching bank guarantees pending commencement of arbitration proceedings. The first matter involved two guarantees issued as performance bonds in two separate construction contracts, both which contained an arbitration clause under the Dubai International Arbitration Centre (DIAC) Rules. The second matter involved an advance payment guarantee for a transport contract which contained an arbitration clause under the Singapore International Arbitration Centre (SIAC) Rules seated in Singapore. Some observations relating to these proceedings are set out below.

 

1. The applications for provisional relief in both cases were filed in the Dubai Court of Appeal. The Federal Arbitration Law (Law No. 6 of 2018) provides that a party may seek interim relief either from the tribunal, or the ‘Competent Court’, being the Court of Appeal of the relevant Emirate, and that the Chief Judge of the Court of Appeal may issue orders for interim relief at the request of a party or a tribunal in respect of existing or future arbitrations. In both matters, the orders were issued for arbitrations which had not yet commenced.

 

2. The court fee for provisional relief is AED 320 per application. In contrast, the court fee for interim relief in support of litigation can be as much as AED 20,020. A comparable fee was payable when obtaining interim relief in support of arbitration before the Federal Arbitration Law came into effect.

 

3. It can take up to two weeks for the court to issue its decision. In the past, it was common for applications for interim relief to be decided on the same day as the application being filed, or within 24 to 48 hours after filing. However, the electronic case registration process of the Dubai Courts usually means that a day or two will be taken up before the matter is placed before a judge. This should be borne in mind as interim relief is often time sensitive.

 

4. The application is determined ex-parte. Notice to the defendant is not issued by court prior to hearing the application for provisional relief.

 

5. A single application may be made for multiple contracts, provided that the parties to the contract are the same. In the first of the two matters, the guarantees which were attached were issued in relation to two separate projects and contracts. However, they were between the same parties, and the dispute resolution provisions were identical, and the Court of Appeal accepted a single application and ordered attachment over both guarantees.

 

6. A party which is not party to the arbitration agreement may be a party to an application for interim relief. In the second of the two matters, the guarantee was procured by a related third party which, although having certain rights under the transport contract was not a party to the arbitration agreement. This third party was named as a co-applicant, together with the party that was subject to the arbitration agreement. Although the court did not provide any reasoning, it is unlikely that the court would have accepted the application for interim relief under the Federal Arbitration Law if at least one of the applicants was not a party to the arbitration agreement.

 

7. It is no longer necessary to file a substantive suit in court. Under the Federal Arbitration Law, a ‘notice of a request for arbitration’ is deemed to satisfy the requirement of a substantive suit and a separate substantive suit need not be filed in court. In practical terms, the applicant should be ready to demonstrate to the court that the notice of arbitration was issued within eight days of the order for interim relief being granted. It should be noted that until last year, the time period for filing a substantive suit was eight days from the date on which the order for interim relief was implemented. However, following amendments to the UAE Civil Procedure Law in 2019, the time period is now eight days from the date on which the order for interim relief was issued.

 

It is important to bear in mind that, as there is no system of binding precedent in the UAE, it is possible that the court might take a different approach in future cases in relation to points 5 and 6. ■

The New DIFC Leasing Law

On 11 January 2020 a new leasing law was introduced in the Dubai International Financial Centre, Law 1 of 2020 (the New Law); and on 14 January 2020 the associated regulations were issued (the Regulations).

 

The New Law and Regulations are an important development for the DIFC. We expect that they will have a positive impact on the real estate market. The New Law is more comprehensive than the previous law (Law 10 of 2018) and brings the DIFC into alignment with the detailed onshore Dubai leasing law set out in Law 26 of 2007 (as amended by Law 33 of 2008); Decree 43 of 2013; and Decree 26 of 2013.

 

In this InBrief we look at the major changes that will impact landlords and tenants in the DIFC under the New Law.

 

Application of the New Law

 

The Regulations have now clarified that the New Law applies to all leases in the DIFC which were entered into prior to the date of commencement of the New Law, except where provisions in the New Law requires compliance with time and notice periods which are incapable of being applied to such leases (Regulation 4.1). In addition, it is important to note that the New Law does not apply to the following two types of leases:

 

1. A lease of premises which are used primarily for serviced apartments or hotel inventory leased as part of a hotel; or

 

2. A lease which is entered into by the parties to a Mortgage of the Leased Premises in accordance with the terms of the Mortgage.

 

A Lease has been defined in the New Law as “a lease under which a person lets premises, which includes a sublease and any form of agreement (howsoever described) that gives a legal right of exclusive possession of premises to the occupant for a specific or ascertainable term in exchange for another consideration.”

 

As such, the New Law applies to all residential, retail and commercial leases in the DIFC.

 

Tenant’s rights

 

The New Law gives tenants of residential premises greater rights by introducing:

 

  1. a new security deposit scheme;
  2. a requirement for entry condition reports; and
  3. rules governing rent increases.

 

The new security deposit scheme

 

The key elements of the new security deposit scheme, which is only applicable to residential leases, are as follows:

 

1. If a landlord of residential premises chooses to charge the tenant a security deposit, then the security deposit must not exceed 10% of the rent.

 

2. A security deposit may only be used to compensate the landlord after a residential lease has ended for the following purposes:

 

a. non-payment of rent;

b. damage to the residential premises, excluding fair wear and tear; or

c. damages for breach of contract, inclusive of direct, indirect and consequential losses.

 

3. A landlord who receives a security deposit must pay it to the DIFC Registrar of Real Property within 30 days.

 

4. The Registrar must hold all security deposits in an escrow account.

 

5. On the expiry or earlier termination of a residential lease:

a. if the landlord and the tenant agree on the amount of the security deposit to be refunded to the tenant, then they must sign and lodge a release form with the Registrar;

b. but, if the landlord and the tenant disagree on the amount of the security deposit to be refunded, then either party may notify the Registrar of the existence of the dispute, and the dispute will be resolved by the Court.

 

6. The Registrar will only pay out an amount of the security deposit in accordance with:

a. a release form signed by the landlord and the tenant agreeing on the amount of the security deposit to be refunded; or

b. a order of the Court.

 

The New Law defines a “Court” as the DIFC court or any specific tribunal created for dealing with disputes under the New Law. Under the previous law, the DIFC Small Claims Tribunal had exclusive jurisdiction over tenancy disputes in the DIFC where the claim amount did not exceed AED 500,000. We assume that this tribunal will continue this role under the New Law, including resolving disputes arising under the new security deposit scheme. However, we expect that a further regulation will be made by the Board of Directors of the DIFCA under the New Law to clarify this issue.

 

Rent Increases

 

For residential leases, a landlord is now required to give a tenant written notice of a proposed rent increase at least 90 days prior to the expiry of the residential lease. If the landlord fails to give this notice, then the rent increase will be invalid.

 

Conclusion

 

Given that Dubai is expecting an increase in rental unit demand as a result of its new long term visa initiatives, dropping rents and Expo 2020, the New Law is a welcome development which may stimulate the property market by attracting more businesses and individuals to rent in the DIFC.

 

If you require more detailed information, please do not hesitate to contact Afridi & Angell. ■

 

 

Sanctions on the Rise

Now, more than ever, sanctions lists are growing daily, and therefore navigating the challenges related to compliance is becoming more complex. In the region, prominent US sanctions already exist with respect to Iran, Syria and Yemen. There has been talk of US sanctions against Iraq and Turkey.

 

A prime example of prominent sanctions are those that the United States on November 5, 2018 fully re-imposed on Iran. These sanctions had been previously lifted or waived under the Joint Comprehensive Plan of Action (or ‘Iran deal’). Given the recent tensions between the US and Iran, the US is aggressively continuing its campaign of maximum financial pressure on the Iranian regime and intends to strenuously enforce the sanctions that have come back into effect as well as newly announced sanctions.

 

While historically enforcement actions have been more prevalent in the financial services sector, regulatory bodies are increasingly turning their attention to other industries which have recently been subjected to significant fines.  The US Department of the Treasury has issued 22 enforcement actions along with a record of USD1.3 billion in total penalties in 2019 alone.

 

Consequently, sanctions and compliance continue to remain critical factors for businesses across all sectors.

 

While not exhaustive, the following are some proactive measures which should be taken by companies to mitigate the risk of violating sanctions:

 

  • Understanding international sanctions regimes: Companies should obtain an appropriate level of understanding of international sanctions regimes, seek information from professionals to the extent necessary, and conduct research to make a determination as to the legality of their transactions under the relevant sanctions’ laws. Entities should check with their regulators regarding  the  suitability of specific programs to their unique situations. For example, the US Office of Foreign Assets Control (OFAC) issues public advisories on important issues related to sanctions, and while  these  documents  may focus on specific industries and activities, they should be reviewed by any party interested in OFAC compliance.

 

  • Due diligence: It is important for companies to conduct continuous due diligence on their entire supply chain, including customers and clients (and their respective partners and affiliates) to ensure the continued sanctions compliance of all stakeholders so that none of them become subject to sanctions or penalties. All stakeholders should be subject to periodic KYC checks.

 

  • Risk assessment: The assessment may include risks posed by clients, customers, products, services, supply chain, intermediaries, counterparties, transactions, and geographic locations. For example, an anti-bribery/anti-corruption risk assessment, may be a good foundation for a sanctions risk assessment.

 

  • Sanctions compliance officer:  Companies should designate an individual with the primary responsibility for integrating the company’s policies and procedures into the daily operations of the company or a dedicated “sanctions compliance officer”. The sanctions compliance officer should be charged with assisting in the development of a compliance program and to monitoring and verifying that procedures are being followed.

 

  • Formulate a sanctions compliance program: Companies should develop and implement a sanctions compliance program and policy manual in order to understand what actions can and cannot be taken. There is no single compliance program suitable for every company. It is further recommended that the sanctions compliance program be subject to regular review and, when necessary, routinely updated.

 

  • Internal controls: The purpose of internal controls is to clarify expectations, define procedures and processes pertaining to sanctions compliance (including reporting and escalation chains), and minimize the risks identified by the company’s risk assessment. Policies and procedures outlining the sanctions compliance program should be easy to follow, capture the organization’s day-to-day operations, and designed to prevent employees from engaging in misconduct.

 

  • Training: The training program on the company’s sanctions compliance program should be provided to all appropriate employees and personnel (and, in particular, business units operating in high-risk areas) on a periodic basis, and at a minimum, annually.

 

  • Use of Technology: Invest in software or update sanctions screening software to comply with sanction regulations.

 

  • Reporting: Companies should put appropriate procedures in place to identify, escalate, and report transactions that are in violation of sanctions regulations (voluntary self-disclosure).

 

  • Contractual safeguards: Companies should include contractual exit rights in all agreements with their counterparties whereby, should enforcement action be taken against a counterparty, the company has the right to remove itself from the transaction.

 

  • Snap-back safeguards: Measures taken by companies should include specific sanctions-related force majeure provisions and sanction termination and wind-down provisions which can provide contractual protection in the event that sanctions are re-imposed in the case of snap-back.

 

  • Documenting: It is imperative for corporates to document and report all sanctions compliance efforts (for example, keep a written record of their screening policy and be able to justify the timescales and frequency of screenings). Their systems and checks should ensure a documented trail of all actions taken in such matters.

 

* * *

 

A company in noncompliance may be opening itself to adverse publicity, fines, and even criminal penalties (if violations are other than inadvertent). Taking preemptive actions would enable a company to show that it has proactively taken steps to structure its operations to ensure that it is compliant with sanctions in an open and transparent manner. Such preventative measures would significantly reduce the potential risks of costly sanctions violations and provide a company with a competitive advantage of being in a better position to navigate sanctions. ■