Tag: Banking and Finance

Implementation of passporting regime for domestic funds

On 11 March 2019, the Securities and Commodities Authority (SCA), the Dubai Financial Services Authority (DFSA) of the Dubai International Financial Centre (DIFC) and the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) issued a joint press release announcing the enactment of legislation enabling the implementation of a “passporting” scheme to facilitate UAE-wide promotion of domestic funds.

 

The three regulators had previously signed a passporting agreement last November and a public consultation process followed in the ensuing months (covered in our inBrief of 30 January 2019).

 

The press release quotes several officials. Of particular note are the comments of the Chairman of the ADGM (who is also a Minister of State in the UAE Federal Cabinet):

 

There has been an accelerating demand and appetite for a greater variety of domestic funds in the UAE by the investment community. The new passporting regime enables investors to access growth opportunities with greater ease and efficiency. It will also bolster the UAE’s economic diversification strategy and attract more foreign direct investments and new investors and institutions to participate and support the growth of our economy and the development of the region.

 

Historically, the existence of three different regulatory regimes in the UAE has been an impediment to the growth of the market for funds since a fund approved by a particular regulator was only eligible for promotion within the relevant jurisdiction and not throughout the UAE. The passporting regime aims to change this.

 

The DFSA and ADGM have published amendments to the relevant rules and regulations implementing the passporting regime. The SCA’s regulations have not yet been published.

 

The Guidance to the DFSA’s Fund Protocol Rules (FPR) explains that:

 

The three UAE securities regulators: the SCA, the DFSA and the FSRA have agreed a “Protocol” regarding co-ordinated supervision of the marketing and selling of units of domestic funds within the UAE (State). The “Protocol” introduces a notification and registration process to enhance the monitoring and supervision of the financial services associated with the marketing and sale of units in domestic funds. The Protocol sets out a common regulatory framework which is to be implemented by each of the regulators. The Protocol is implemented in the DFSA Rulebook primarily through this module (FPR).

 

The passporting regime applies to both private and public domestic funds. It does not apply to foreign funds promoted in the UAE. Foreign funds and other types of securities promoted in the UAE remain subject to the applicable rules of the jurisdiction in which they are promoted.

 

Overall, this is a positive development that will reduce the regulatory burdens faced by domestic funds. ■

ADGM grows up: issues first fines

The Abu Dhabi Global Market (ADGM), the financial free zone which began operations in 2015, has now come of age.

 

On 14 April 2019 Mr Alexander Guy, Senior Executive Officer and Director at Eshara Capital Limited, had the uncommon honour of becoming the first named person to be fined by ADGM’s Financial Services Regulatory Authority. Eshara Capital, in its corporate capacity, was also fined in connection with the same contraventions.

 

Commencement of regulatory enforcement actions, such as the imposition of financial penalties, demonstrates that the Financial Services Regulatory Authority has the capacity, and perhaps more importantly, the appetite to take actions against its member firms (and their senior management). Financial free zones who act too aggressively in the early days risk scaring away potential members. Being seen as too lenient is just as bad, and risks threatening the creditability of the institution itself.

 

In this instance Mr Guy has been fined a modest sum, USD 10,000. Eshara Capital has itself been fined a further USD 10,000. The size of the fines reflects the relatively low-key nature of the offenses. It appears that Eshara Capital failed to file a number of regulatory returns. These included the firm’s annual prudential return for 2017, the regulatory return auditor’s report for 2017, and the first three quarterly returns for 2018.

 

The regulator has drawn attention to the fact that Mr Guy, as SEO and a licensed director, had ultimate responsibility for the day-to-day management of Eshara Capital and held significant responsibilities for ensuring that Eshara Capital complied with all applicable legislation. The regulator also drew attention to the fact that although Mr Guy appeared to have been cooperating with the regulator in terms of remedying the defaults, the remedial action he took in respect of the contraventions was not timely or complete. Mr Guy’s conduct allowed Eshara Capital to breach and remain in breach for a considerable period of time, and despite repeated reminders from the regulator. In conclusion, it was held that Mr Guy behaved in a reckless manner.

 

The regulator did not order disgorgement in this matter as it appears that Mr Guy did not derive any personal financial benefit from the contravention or the reckless conduct.

 

In any regulated environment there will be a period of time between a contravention, the regulator becoming aware of it, investigating the same, and then taking public enforcement action. Under the circumstances, it might be reasonable to assume that there is now a pipeline of ADGM enforcement actions, and that Mr Guy’s punishment is but the first.

 

Afridi & Angell has been advising on matters of UAE financial services regulation since 1975. In 2008 we advised the first firm to be sanctioned by the Dubai Financial Service Authority, and we have continued to advise on regulatory investigations and enforcement actions in both Dubai and Abu Dhabi. ■

New promotion regime for domestic funds

In late November 2018, the Securities and Commodities Authority (SCA), the Dubai Financial Services Authority (DFSA) of the Dubai International Financial Centre (DIFC) and the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market (ADGM) announced that they had reached agreement on facilitating the licensing of domestic funds by each authority for promotion across the UAE.

 

This is a potentially significant development. Historically, onshore legislation in the UAE has not been suitable for the formation of funds in the UAE. This has changed somewhat in light of the new UAE Commercial Companies Law that came into effect in 2015 and subsequent regulations issued by the SCA designed to encourage domestic fund formation.

 

The DIFC and the ADGM have more comprehensive legislation regarding funds and funds established in these jurisdictions are not subject to the 51% UAE ownership requirement. Hence, they are generally viewed as more attractive destinations to establish funds than the UAE proper. However, the existence of three different regulatory regimes in the UAE has been an impediment to the growth of funds set up in the DIFC or the ADGM. Most potential investors are not located in these financial free zones and a fund set up in one of these zones must comply with the regulatory regime of the SCA when marketing to investors in the UAE. This not only increases the regulatory burden because such funds have to comply with the laws of two different jurisdictions with very different rules but, as a practical matter, it means that a fund set up in the DIFC or the ADGM has been treated the same as a fund set up in foreign country as far as the SCA is concerned.

 

Hopefully, the new regime that will be developed under the agreement signed by the SCA, the DFSA and the FSRA will put an end to that. The press release states:

 

“The SCA, DFSA, and FSRA agreed on a common legislative framework in their respective jurisdictions, enabling them, to facilitate regulatory coordination amongst them in licensing domestic funds upon the adoption of the legislation. The three bodies confirmed that funds, which are licensed in accordance with the provisions of this agreement and the licensing regulations, may be promoted in or from the financial free zones in the UAE, in line with the provisions of the agreement and the licensing regulations. Under the terms of the agreement, a notification and registration facility will be established by each regulator, facilitating the promotion and sale of domestic funds, set up within the UAE, outside the financial free zones, or in either of the DIFC or ADGM, to potential investors situated anywhere in the UAE, and under a single licence.”

 

In other words, if the new regime works as advertised, a fund set up in the DIFC or the ADGM will be able to market and sell to investors throughout the UAE while only having to comply with the regulatory requirements of its jurisdiction of incorporation.

 

It is not yet clear how long it will take to implement the new regime contemplated by the agreement. The press release states that the SCA, DFSA, and the FSRA have agreed to establish common rules to implement the regulatory regime contemplated by the agreement but provides no estimated timetable for when such rules might be published. It further explains that the authorities will undertake a consultation process regarding the proposed new regime. Notwithstanding the tentative nature of these formal communications, it appears that some investment firms in the DIFC are already advertising this new capability.

 

This agreement represents a very encouraging development that could have a positive impact on making the UAE a much more attractive place to establish funds. ■

Confidentiality under renewed focus

The UAE federal government has recently issued a raft of important legislation, addressing and in many ways updating areas of law that are key to businesses in the jurisdiction. Amongst this legislation is Federal Decree-Law 14 of 2018 concerning the central bank and the organisation of financial institutions and activities (the New Banking Law) and Federal Decree-Law 20 of 2018 concerning anti-money laundering and anti-terrorism financing (the New AML Law). Both the New Banking Law and the New AML Law repeal and replace the previous legislation on their respective subjects.

 

Importantly, the New Banking Law and the New AML Law have together enhanced the protection afforded to confidential information under UAE law, in particular where financial and legal service providers and their customers and clients are concerned.

 

Confidentiality under UAE law

 

While it has long been the case that confidential information was given protection, such protection was spread across various pieces of legislation. For example, it has been generally accepted that UAE law includes an obligation on the part of a bank or a financial institution to hold information concerning its customers as confidential. This was understood to form part of customary banking practice in the UAE and was confirmed through certain guidance issued by the Central Bank. Similarly, obligations of confidentiality were placed on other service providers through sector specific legislation on the matter (see for example, Dubai Law 11 of 2013 concerning obligations of insurance companies in the Emirate of Dubai and Federal Law 23 of 1991 concerning the licensing of advocates). A general obligation of confidentiality was also contained in the UAE Penal Code (being Federal Law 3 of 1987, as amended).

 

Each of the New Banking Law and the New AML Law improves on this position and places customer confidentiality on statutory footing.

 

Confidentiality under the New Banking Law

 

Article 120 of the New Banking Law provides that all data and information concerning accounts, deposits and safe deposit boxes  (along with transactions concerning these facilities) of a customer shall be considered confidential and must not be directly or indirectly disclosed to any third party, in each case without the prior written consent of the customer. The obligation to keep such data and information confidential is stated to continue for an indefinite period, notwithstanding the termination of the relationship between the account holder and the bank or financial institution. Importantly, Article 120(4) stipulates that the obligation of confidentiality extends to all “agencies” and “persons” and other entities that by virtue of their profession or employment have access to such information.

 

Though the clarity provided by the Banking Law with regards to customer confidentiality is welcome, it remains to be seen how this obligation will affect the exchange of credit information (for example, in the context of disclosure of financial information to a UAE credit rating agency). It also remains to be seen whether there will be clearly prescribed sanctions and/or penalties for breach of such obligations.

 

The Banking Law provides that the Central Bank will issue further rules on this matter and it is anticipated that these rules will provide the required granularity to the confidentiality obligations set forth in the New Banking Law.

 

Confidentiality under the New AML Law

 

Like the New Banking Law, the New AML Law contains guidance with respect to confidentiality. Importantly, Article 15 of the New AML Law contains an exception to the obligation of a bank or financial institution covered by the New Banking Law to hold customer information confidential. In summary, such a bank or financial institution must issue a notification in the prescribed form to the designated unit within the Central Bank, where it has reasonable grounds to suspect a transaction or funds concerns a crime. In such case, the bank or financial institution must inform the designated unit within the Central Bank of its suspicion “without delay” and must include an appropriate level of detail on the account or transaction concerned, and without regard to the confidentiality of such information. It remains to be seen how banks and financial institutions will balance their obligations of confidentiality (as now enshrined within the New Banking Law) against their obligations of disclosure under the New AML Law. The obligation to report suspicious transactions is also imposed on Designated Non-Financial Businesses and Professions, a category that will be detailed in the implementing regulations contemplated by the new AML Law. Importantly, it remains to be seen how banks will determine what constitutes “reasonable” grounds. Is mere suspicion adequate?

 

Interestingly, the New AML Law provides (albeit indirect) recognition to the fact that lawyers (including those licensed as “legal consultants” in addition to those licensed as “advocates”) owe a duty to their clients to treat information received from such clients as confidential. It was previously the case that the confidentiality obligations of a legal consultant had to be derived by analogy to Federal Law 23 of 1991 concerning the licensing of advocates and, in the Emirate of Dubai, from the provisions of the draft code of conduct issued by the Dubai Legal Affairs Department.

 

Article 15 of the New AML Law stipulates that lawyers, notaries and other legal professionals are exempt from the requirements of disclosure contained in article 15 of the New AML Law, provided such information is received “subject to professional confidentiality”. This exemption is also extended to independent legal auditors. While the introduction of such exemption is welcome, it remains to be seen how the courts and authorities will interpret the requirement for the relevant information to have been received “subject to professional confidentiality” and whether the implementing regulations contemplated by the New AML Law will place limits on this exemption.

 

Despite further guidance pending, these legislative developments highlight the importance of confidentiality for businesses that receive and deal with confidential information. It also helps to bring into focus the high level of importance placed by UAE policy makers on matters of confidentiality and privacy. Businesses in the UAE would be well advised to take note of these developments and to stay alert for further developments in this field. ■

 

Netting arrangements in qualified financial contracts made enforceable

For decades, banks and other counterparties in the UAE have obtained financial services from foreign financial institutions. Industry bodies, such as the International Swaps and Derivatives Association (ISDA), the International Capital Market Association and the International Securities Lending Association, have developed standard documentation for these kinds of transactions. A new statute in the UAE makes it clear for the first time that the netting and setoff provisions in such documentation are valid and enforceable under UAE law. Among other matters, this clarity should reduce the cost to UAE counterparties of obtaining these financial services.

 

Federal Decree-Law 10 of 2018 on Netting (the Netting Law) was published in the UAE Federal Gazette on 30 September 2018 and will take effect on 30 October 2018 (the Effective Date). It is a significant development to the derivatives framework in the UAE, in terms of both the legal enforceability of such arrangements and the ability to implement close-out netting (i.e., netting of obligations following an event of default or termination event), particularly following the bankruptcy of one of the parties. The Netting Law is closely modelled on the 2018 ISDA Model Netting Act and Guide (as published by ISDA) and applies to all Qualified Financial Contracts, Netting Agreements or Collateral Arrangements entered into by a person or entity in the UAE (other than persons and entities located in financial free zones, i.e., the DIFC and ADGM, which have separate netting regulations).

 

Netting

 

The Netting Law allows parties to enter into Netting Agreements for the purposes of netting off their payment and delivery obligations under Qualified Financial Contracts (Netting). A Netting provision may include the following features:

 

(a) any termination, liquidation and/or acceleration of payment/delivery rights or obligations under Qualified Financial Contracts entered into under a Netting Agreement or to which a Netting Agreement applies;

 

(b) calculation, estimation or adoption of an index of close-out or termination value, market value, liquidation value or any other relevant value, which may arise from a party’s failure to enter into or perform a transaction under a Netting Agreement, where the rights and/or obligations of the parties under such Netting Agreement have been terminated, liquidated and/or accelerated under point (a), above;

 

(c) conversion of the values calculated under point (b), above, into a single currency;

 

(d) determination of the net balance of values calculated under point (b), above, as converted under point (c), above, whether by operation of setoff or netting; and

 

(e) entry into an arrangement whereby the net amount calculated above becomes payable directly or as part of either the (i) consideration for a specific asset or (ii) damages for non-performance of such transaction.

 

The Netting Law currently identifies 23 categories of agreements as Qualified Financial Contracts (which create either a right to receive or an obligation to make a payment or delivery or to transfer title to assets/commodities for consideration) including all types of swaps (in relation to currencies, interest rates, basis rates or commodities), forward rate agreements, currency or interest rate futures, currency or interest rate options, derivatives (relating to bonds, energy, bandwidth, freight, emissions and property index), securities contracts, Collateral Arrangements,1   commodities related contracts and any Shari’ah compliant equivalent of the above agreements. This list may be expanded by the Committee for Designation of Qualified Financial Contracts (the Committee), which will be formed under a resolution issued by the UAE Minister of Finance (the Resolution).

 

Under the Netting Law, Netting Agreements include:

 

(a) any agreement between two parties for Netting of present or future rights to or obligations for payments or delivery, or transfer of title arising in connection with one or more Qualified Financial Contract between the parties (a Master Agreement);

 

(b) any agreement providing for the Netting of amounts due under two or more Master Netting Agreements (a Master Netting Agreement);

 

(c) any Collateral Arrangements relating to or forming part of a Master Netting Agreement or Master Agreement;

 

(d) any Shari’ah compliant agreement or arrangement which is intended to have a similar effect as an agreement under points (a) through (c) above or any other Netting Agreement; and

 

(e) any agreements, contracts or transactions which falls within the definition of a Qualified Financial Contract.

 

A Netting Agreement and all Qualified Financial Contracts to which it applies will constitute a single agreement.

 

Legal Recognition

 

Under UAE law, futures, margin trading and derivatives transactions generally have been viewed as potentially unenforceable due to perceived gharar, an unacceptable level of risk or uncertainty that undermines contract formation. For this reason, the potential exists – and UAE courts have held in some instances – that derivatives are unenforceable “contracts of risk,” even when used to manage risk (as in hedging contracts) rather than to create risk or to speculate. Even for Shari’ah compliant hedging products in the market (for example, the ISDA/IIFM Tahawwut Master Agreement), which are supported by fatwas confirming that such products are Shari’ah compliant and free of gharar, there was no certainty on how the courts would hold. The Netting Law has minimized, if not eliminated, these uncertainties by providing that Qualified Financial Contracts shall not be void, unenforceable, or not final by reason of gharar under the UAE Civil Code.

 

Bankruptcy

 

Under the UAE Bankruptcy Law, a debtor and creditor may only set off obligations (i) if the conditions for exercising the setoff are satisfied before initiating procedures under the UAE Bankruptcy Law, (ii) if conducted as part of the implementation of a preventative composition or restructuring scheme or (iii) as approved by the court.

 

The Netting Law provides that the provisions of a Netting Agreement shall be deemed final and enforceable (including against a third party security provider, even if such third party becomes insolvent), even following the insolvency of one of the parties thereto. The arrangements under a Netting Agreement may not be suspended, delayed or made conditional merely by the appointment of a liquidator or the initiation of bankruptcy proceedings or under any other law applicable to insolvent parties. Insolvency and/or bankruptcy proceedings will not affect the Netting arrangements under a Netting Agreement or a Qualified Financial Contract (or any other financial contract) to which a Netting Agreement applies. Similarly, the provisions of a Netting Agreement shall not be affected by any limitations on setoff or netting imposed under any insolvency or bankruptcy laws.

 

In case of procedures under the UAE Bankruptcy Law, the liquidator or trustee of a party to a Netting Agreement (the Insolvent Party) may annul, stop or refuse the performance of a transaction constituting a preference to a non-insolvent third party (the Third Party). For example, such a transaction could be the transfer of cash, assets, property or collateral from the Insolvent Party to the Third Party under a Netting Agreement. However, the liquidator or trustee may do so only on the basis of clear and convincing evidence that such Third Party entered into the transaction with the intention to prevent, hinder or delay debt recovery by a current or future creditor of the Insolvent Party. There is no definition of “clear and convincing evidence” (a term that has no antecedent in UAE law), but the concept would appear to present a higher hurdle than a mere preponderance of evidence. Significantly, there are no other grounds in the Netting Law for a liquidator or trustee to fail to implement Netting.

 

Multi-Branch Netting

 

In line with the 2018 ISDA Model Netting Act and Guide, the Netting Law has recognized Multi-Branch Netting Agreements (the MBNA) as Netting Agreements under which a party can enter into Qualified Financial Contracts through its Home Office (i.e., the office in its Home Country) and one of its branches or agencies in countries other than its Home Country (i.e., the jurisdiction where such party is incorporated regulated or duly registered).

 

In the event of the insolvency of a foreign party’s branch/agency (the Branch), its liability (or the liability of its liquidator in the UAE) to the non-insolvent counterparty (the Counterparty) shall be calculated on the date of the termination of the Qualified Financial Contract under the MBNA and limited to the lesser of (i) the foreign party’s net payment obligations2 (as adjusted by any payments to the Counterparty and the fair market value of any collateral provided by the foreign party under the MBNA) or (ii) the Branch’s net payment obligation.3  The foreign party’s net payment entitlement4 from the Counterparty (as adjusted by any payments made to the liquidator of the foreign party and the fair market value of any collateral provided by the Counterparty under the MBNA) shall be netted against the Counterparty’s net payment entitlement from the foreign party. The Counterparty may liquidate any collateral (provided under an MBNA) and apply the proceeds against settlement of sums due from the foreign party under any related Qualified Financial Contracts. Any excess collateral shall be returned.

 

The Committee

 

The Committee shall undertake the following responsibilities in accordance with the mechanisms outlined in the Resolution:

 

(a) providing opinions on topics relating to Qualified Financial Contracts;

 

(b) designating any additional financial agreement, contract or transaction as a Qualified Financial Contract;

 

(c) amending the list of Qualified Financial Contracts; and

 

(d) any other function designated by the UAE Cabinet.

 

Conclusion

 

The introduction of the Netting Law is a sign of the UAE’s desire to participate fully in international markets for financial services. UAE counterparties will now be able, more readily and presumably at lower cost, to take advantage of the full range of products that are available.

 

Nevertheless, it remains to be seen how the Netting Law will be implemented by the courts in specific cases. Financial contracts concluded before the Effective Date that qualify as Netting Agreements or Qualified Financial Contracts should now be enforceable, even though enforceability might have been uncertain when the contracts were first concluded. Proceedings under the UAE Bankruptcy Law will be governed by the Netting Law as of the Effective Date, but trustee, liquidator or court actions taken before the Effective Date would presumably remain undisturbed even if inconsistent with the Netting Law. We will continue to report as these and other issues are addressed in the coming weeks and months. ■

 

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1 The Netting Law defines a Collateral Arrangement as a margin, variation margin, collateral or security procedure or other credit enhancement tool relating to a Netting Agreement or Qualified Financial Contract entered into under a Netting Agreement or to which a Netting Agreement applies, including (a) pledges, mortgages and charges (whether possessory or non-possessory), (b) Title Transfer Collateral Arrangements (as defined in the Netting Law) and (c) any guarantee, letter of credit or reimbursement obligation by or to a party to a Qualified Financial Contract, in connection with such Qualified Financial Contract.
2 The aggregate of all amounts owed by the foreign party (including subsidiaries and affiliates) to the Counterparty after giving effect to the Netting provisions under the MBNA and all related Qualified Financial Contracts.
3 The amount (if any) owed by the Counterparty to the Branch under a MBNA after giving effect to the Netting provisions under all related Qualified Financial Contracts between the Counterparty and Branch.
4 (i) The aggregate of all amounts owed by the Counterparty (including to any subsidiaries and affiliates of the foreign party) to the foreign party after giving effect to the Netting provisions under the MBNA and all related Qualified Financial Contracts or (ii) the aggregate amount owed if the MBNA contained provisions providing for payments to the parties, upon termination of related Qualified Financial Contracts.

Acquisition Finance (UAE chapter), Getting the Deal Through

This globally relevant Q&A of Lexology, Getting The Deal Through, focuses on key questions centered around Acquisition Finance in the United Arab Emirates. Some topics covered include; general structuring of finance, enforceability of foreign judgements, enforcement of claims and insolvency and many more.

The new UAE Pledge Law – promulgation of regulations that make registration available

UAE Federal Law 20 of 2016 (Regarding the Pledge of Movables as Security for a Debt) (the Pledge Law) introduced a new regime for registering a pledge over moveable assets which are pledged as security for the repayment of a debt. We reported on this law in our inBrief of January 2017, New UAE Pledge Law Over Moveable Assets, and our Legal Alert of 19 February 2018, The New UAE Pledge Law – Security Registration.

 

The Emirates Development Bank has been appointed as the registrar, and the registry is known as the Emirates Movable Collateral Registry (the Registry).

 

The actual registration of pledges was subject to promulgation of the implementing regulations under the Pledge Law. The implementing regulations have now been issued by way of Cabinet Resolution 5 of 2018 dated 1 March 2018 (the Implementing Regulations). In addition, Ministerial Resolution 42 of 2018 dated 19 March 2018 provides detailed instructions relating to registration of security over movables (the Instructions).

 

We are examining the Implementing Regulations and the Instructions and will report separately on the contents of the same. In the meantime, we have made enquiries to the Emirates Development Bank concerning the new regulations, and we have been informed as follows:

 

• Registration establishes priority but is not required for the creation of a valid security interest.

 

• Any movable asset located in the UAE (other than the free zones) may be registered, including bank accounts, assignments of receivables and guarantees.

 

• Assets in the free zones are outside the coverage of the Registry.

 

• The holder of the security interest may be a UAE entity or a foreign entity.

 

• The security agreement need not be notarized and need not be in Arabic.

 

• When a security interest is registered, the holder of the security interest is required to notify the provider of the security, which party then has a fixed period of time to file its objections.

 

It was previously required that holders of security interests predating the Pledge Law would have to register their security interests under the Pledge Law by 15 March 2018. This deadline is no longer in effect. Instead, Emirates Development Bank expects to notify banks of the new deadline in the near future. ■

The new UAE Pledge Law – security registration

UAE Federal Law 20 of 2016 (Regarding the pledge of moveables as a security for debts) (the Pledge Law) introduced a new regime for registering a pledge over moveable assets which are pledged as security for the repayment of a debt. We reported on this law in our inBrief of January 2017, New UAE Pledge Law Over Moveable Assets.

 

The actual registration of pledges was subject to establishment of a security register pursuant to the implementing regulations issued under the Pledge Law. This security register has now been established by the Emirates Development Bank and is known as the Emirates Movable Collateral Registry.

 

The Emirates Movable Collateral Registry allows:

 

1. free public searches of registered securities;

 

2. certified searches of registered securities;

 

3. registration of notices of security interests against assets of the primary obligors as well as third party security providers, including non-resident foreign persons (legal or natural) and UAE entities incorporated by federal decrees, for a minimal fee; and

 

4. registration of notices of termination of security interests (whether by mutual consent of the parties or by way of a court order) free of charge.

 

All parties holding pledges over moveables in the UAE by way of possession have until 15 March 2018 to register their precedence with the Emirates Movable Collateral Registry. To our knowledge, it is unlikely that an extension of time will be granted. Therefore, we recommend this is done as a priority. ■