• Crypto

    The emerging use of cryptocurrencies in the Middle East

    emerging use of cryptocurrencies in the Middle East

    Cryptocurrencies are digital assets represented in the form of tokens which are designed to work as a medium of exchange and which employ sophisticated cryptography to secure and validate the transfer of value.

    The ‘crypto’ in ‘cryptocurrency’ refers to cryptography – the practice and study of techniques for secure communication in the presence of third party ‘adversaries’.  Accordingly, cryptocurrencies are cryptographically secure in that, while they are theoretically able to be broken, it is infeasible to do so by any known practical means.

    There are approximately 2.5 billion individuals with access to the internet around the world and, as cryptocurrencies know no borders, they can be used internationally without incurring expensive transfer and currency exchange fees.

    This year, Davidson & Co represented and acted for the Seller in transferring ownership of a portfolio of transferable cryptographic blockchain-based digital information units with an approximate valuation of GBP 50,000,000. The transaction took place over a period of 2 months coupled with a corporate restructuring which resulted in an offshore corporate vehicle owning these crypto assets.

    Whilst the UAE is still in the process of establishing formal regulations to govern the operation and trade of crypto assets, jurisdictions such as Saudi Arabia and Bahrain are testing the usage of certain blockchain technology and are exploring the concept of trading in crypto currencies.

    Reach out to us for a confidential discussion on any cryptocurrency matters and to find out how we can help.

    Our team would be delighted to hear from you.

    Rhea Bindra
    rbindra@davidsoncolaw.com

    Yousif Ahmed
    yahmed@davidsoncolaw.com

  • Employment

    FAQ’s – Terminating an Employment Contract in the UAE

    Terminating an Employment Contract in the UAE

    The decision to end an employment relationship for both an employee and employer is often one that is difficult to make, and stressful for all those involved. This is heightened by the requirement to ensure that the termination of the employment contract is handled correctly and in line with the applicable law. To assist, we address the key provisions of Federal Law No.8 of 1980 otherwise known as the UAE Labour Law, on the termination of both limited and unlimited term contracts.

    Limited vs Unlimited Term Contract

    1. Limited – Generally a start and end date are provided for in the body of the contract up to a maximum of 2 years.
    2. Unlimited term contract – An open-ended contract with no specified end date.

    How is a Limited Term Contract Terminated?

    Unless both parties agree by mutual consent prior to the end date to either; i) renew the contract or ii) convert the contract in to an unlimited term contract, the contract is cancelled automatically. It is therefore unusual for a limited term contract to include notice provisions.

    i) Termination by Employer

    An employer may terminate a limited term contract before the end date if it can be proved the employee breached one of the grounds provided for in Articles 120 and 88  (as detailed below).

    ii) Termination by Employee

     Under Article 121, where an employer fails to honour his obligations to an employee under the terms of the employment contract or, if an employee is assaulted by the employer or the employer’s legal representative, an employee may lawfully resign without notice.

    Early Termination of a Limited Term Contract by Employer

    Where an employer seeks to terminate a limited term contract prior to the end date, for reasons other than those specified in Articles 120 or 88, they will become liable to pay the employee compensation of a maximum of 3 months’ full salary or the remainder of the term of the contract, whichever is shorter.

     Early Termination of a Limited Term Contract by Employee

     Where an employee seeks to terminate a limited term contract prior to the end date, for reasons other than those specified in Article 121, they will become liable to pay the employer compensation of a maximum of 3 months’ half salary or the remainder of the term of the contract, whichever is shorter.

    How is an Unlimited Term Contract Terminated?

    i) Termination by Employee

    An employee may terminate their employment contract by providing the employer with notice as per their contract (minimum of 30 days’ and maximum 3 months’).

    In addition, an employee may lawfully terminate their contract of employment, without notice, for either of the reasons stipulated under Article 121 as aforesaid.

    ii) Termination by Employer

    The UAE Labour Law provides for two ways in which an employer can lawfully terminate an employee.

    1 – “Valid Reason”

    Under Article 117, an employer may terminate an employee with notice as per their contract (minimum of 30 days’ and maximum 3 months’) for a “valid reason”. While the term “valid reason” is not defined under the law, any reason must be work related for example, poor performance or misconduct.

    2 – Gross misconduct as defined in Articles 88 and 120 of the UAE Labour Law

    The UAE Labour Law provides that an employer may terminate an employee without notice for specific acts that amount to gross misconduct as provided for under Articles 88 and 120:

    • Assumes a false identity or nationality or submits forged certificates or documents;
    • Engaged on probation and is dismissed during or at the end of probationary period;
    • Commits a fault resulting in substantial material loss to the employer, provided that the latter notifies the labour department of the incident within 48 hours of him becoming award of its occurrence;
    • Disobeys instructions on the safety of work or workplace, provided that such instructions are in writing and posted as a conspicuous place and are communicated verbally to the worker, in case he is illiterate;
    • Defaults on his basic duties under the employment contract and fails to redress such default despite a written interrogation and a warning that he will be dismissed if such default is repeated;
    • Reveals any confidential information of the firm for which he works;
    • Is convicted by a competent court of a crime against honour, honestly or public morals;
    • Is found in a state of drunkenness or under the influence of a narcotic drug during working hours;
    • Assaults the employer, the manager in charge or any of his workmates during working hours;
    • He is absent from work without a valid reason for more than 20 non-successive days in one single year, or for more than 7 successive days.
    • If found to be working for another employer while on annual or sick leave [Article 88].

    Where an employee is validly found to be terminated under any of the aforementioned grounds, they will forfeit their entitlement to end of service gratuity.

    What will happen if the notice period is not complied with?

    In the event that either party fails to serve notice in accordance with the law and/or employment contract provisions, or has waived/reduced the period of notice, the other party is entitled to payment in lieu of notice equivalent to the entire or reduced notice period. Compensation is calculated based on an employee’s last salary.

    End of Service Gratuity Provisions when Employer Terminates Contract (Limited and Unlimited Term Contracts)

    If an employee has completed at least twelve months in continuous employment with an employer, then they are entitled to payment of end of service gratuity upon the termination of their employment. The end of service gratuity is calculated as follows:

    • 21 days wages for every year of employment completed, and for each year of the first five years of employment (calculated pro rata for any additional days served).
    • 30 days wages for each additional year of employment after five years, (calculated pro rata for any additional days served).

    End of Service Gratuity Provisions when Employee Terminates Contract

    i) Limited Term Contract

    An employee is not entitled to end of service gratuity unless they have been in continuous employment for over 5 years. In these circumstances, end of service is calculated as if the employee terminated the employment relationship under an unlimited term contract.

    ii) Unlimited Term Contract

    Provided an employee has completed at least twelve months in continuous employment with an employer, then they are entitled to payment of end of service gratuity upon the termination of their employment on a reduced rate as follows:

    • 1 – 3 years’ employment, one third of 21 days’ basic wage for each year of service.
    • 3 – 5 years’ employment, two-thirds of 21 days’ basic wage for each year of service.
    • 5 years’ employment, full 21 days’ basic wage for each year of service.
    • 5+ years employment, 30 days’ basic wage for each additional year.

    In all circumstances, the amount of gratuity shall not exceed 2 years wage.

    For further information on how we can assist you in your enquiries regarding Labour Laws, or to discuss in more detail any of the general principles raised above, please contact us on 04 343 8897 where one of our team will be delighted to assist you.

     Please note that the DIFC has a separate legal framework for Employment matters.

    Victoria Smylie
  • Corporate Law

    Use of Restrictive Covenants in Commercial Contracts in the UAE

    Use of Restrictive Covenants in Commercial Contracts

    Restrictive covenants can be a useful tool for employers to protect themselves from current and/or former employees who may seek to gain an unfair competitive advantage by, for example, immediately joining a competitor business and/ or misusing confidential information to their own ends.

    It is crucial to be aware that restrictive covenants are, to the extent that they restrict an employee’s activities following termination, a restraint of trade and therefore unenforceable unless they go no further than is reasonably necessary to protect the employer’s legitimate business interests. Accordingly, it is very important that consideration is given to the scope and duration of post-termination restrictive covenants.

    Generally, taking an overly aggressive approach when imposing restrictive covenants may cause difficulties with enforceability. For example, a restrictive covenant imposed on a junior employee which prevents him or her from working with a competitor for twenty-four months may be seen by the courts as going further than is necessary to protect a legitimate business interest and therefore be deemed unenforceable.

    Restrictive covenants must be carefully and well drafted – if they exceed what is considered necessary then they risk being unenforceable. This is something we can assist clients with. Other key tips to take note of are: (a) ensure employment contracts are properly signed to evidence the employee’s agreement to the restrictive covenants; and (b) consider updating such restrictions when employees are promoted to a more senior level. Finally, given the importance of social media, non-solicitation clauses should be drafted to work in this context and alongside a robust social media policy.

    Bespoke drafting of restrictive covenants is vital. Template contracts are unlikely to provide you with sufficient protection as covenants need to be limited to the elements of the business the employee was involved with and to the relationships they shared. The duration of covenants should be no longer than what is necessary (usually up to a maximum of twenty-four months) and what is reasonable will vary depending on the sector and the employee’s role within your company. Consider the shelf life of confidential information and the time it would take to consolidate relationships with customers/the workforce following an employee’s departure.

    Reach out to us for a confidential discussion on Restrictive Covenants or general Employment and/or Corporate matters and to find out how we can help.

    Our team would be delighted to hear from you.

    Rhea Bindra
    rbindra@davidsoncolaw.com

    Yousif Ahmed
    yahmed@davidsoncolaw.com

  • Taxation/ Visa

    UAE to introduce VAT Tax Refund Scheme for Tourists

    UAE to introduce VAT Tax Refund Scheme for Tourists

    The UAE Federal Tax Authority (FTA) has announced a tax refund scheme for tourists to claim refunds of Value Added Tax (VAT). Tax invoices issued as of 18 November 2018 and forward will be eligible for the refund.

    VAT refunds will be valid on purchases over AED 250 at more than 4,000 participating retail stores. Requirements for retailers to register for the scheme include the production of a Tax Registration Number (TRN), submitting a request to the FTA to participate in the scheme and meeting the financial credit requirements specified by the system. Eligible outlets will be identifiable via visible posters displayed on their storefronts.

    Tourists will receive refunds through a special refund kiosk at their point of departure upon production of the valid tax invoices, copies of their passport and a credit card. The VAT will then be refunded either in cash or by credit card.

    The scheme will be introduced in two phases; from the 18 November 2018, Abu Dhabi, Dubai and Sharjah international airports will implement the digital refund systems and as of mid-December 2018, the system will be fully operational and include all airports and land and sea ports in the UAE.

    For any of your legal requirements please get in touch with Davidson & Co today.

  • Economy/ Private Client

    Davidson & Co – start planning for the future with us

    start planning for the future with us

    At Davidson & Co, we pride ourselves on being one of a limited number of firms within the region offering a full range of private client services including succession planning and asset protection for individuals and High Net Worths; family governance and advice to family offices. Essentially, we help clients plan for the future. At the helm of our team and cementing our position as market leaders, is Andrew Young, who features amongst the top 50 private client advisors globally in the prestigious Citywealth Leaders List as listed in Chambers HNW 2018 “Leaders in their Field” for the UAE.

    The value of making arrangements for families and the next generations to come is often overlooked, and there is a common misconception that succession planning and asset protection is only relevant for the rich and famous, or the elderly.

    When it comes to succession planning and asset protection, there is no ‘one size fits all’ approach. Davidson & Co we are able to tailor our services depending on a client’s personal circumstances and wishes. This may range anywhere from the preparation of a Will through the DIFC Wills and Probate Registry Service Centre, to the implementation of an offshore Private Trust Company (PTC) trust structure, foundation or single family office for high net worth individuals who own assets located all around the world.

    Over the past number of years there has been a significant drive to enhance and mature the succession planning vehicles available in the region and there is, therefore, no better time to start planning for the future with us.

    Our team would be delighted to hear from you.

    Victoria Smylie
    vsmylie@davidsoncolaw.com