• Federal Law/ Legal Update

    Arbitration Law Update – Federal Law No. 6 of 2018

    Arbitration Law Update

    The much-anticipated Federal Law No. 6 of 2018 (the “New Federal Law”), which broadly aligns the UAE federal law with the United Nations Commission on International Trade Law (UNICITRAL) Model Law on International Commercial Arbitration, was implemented in mid-2018 in an attempt to secure the UAE’s position as an international hub for arbitration disputes. The New Federal Law, which is seen as a radical overhaul, has repealed Articles 203 to 218 of the UAE Civil Procedure Code (Federal Law No. 11 of 1992 (as amended)), and was earmarked to increase the scope of application of federal arbitration law, to clarify procedural issues stemming from capacity to enter arbitration agreements, and to empower tribunals to order interim remedies.

    What is Arbitration?
    Arbitration is a popular form of dispute resolution whereby arbitrators, as opposed to judges, render an arbitration award that is legally binding on both parties. Arbitration is attractive in commercial disputes, as parties can agree the procedure that a tribunal must follow, as well as nominating arbitrators with the relevant expertise to comprise the tribunal, rather than an expert of law (judge).

    Scope of Application
    The New Federal Law potentially extends the scope of the law to apply to international arbitrations (those seated outside the UAE) where the governing law is UAE law. This interpretation is ambitious, and it remains to be seen whether extraterritorial application will be accepted in other seats.

    Arbitration Agreements
    The New Federal Law still contains express provisions relating to the authority to enter arbitration agreements, though the requirements have been somewhat watered down. Incorporation by reference, in line with the UNICCITRAL Model Law, is now deemed acceptable, as is a party’s request to refer a dispute subject to court proceedings to arbitration where it is alleged the parties agreed to arbitrate. These changes are designed to reduce the all-too-common procedural delay tactics whereby one party challenges the signatory’s capacity to enter the arbitration agreement.

    Interim Remedies
    In a much anticipated and welcomed step forward, the New Federal Law expressly recognises the tribunal’s authority to order interim or conservatory measures as it considers necessary. This will allow for preservation and maintenance of evidence and assets, and is undoubtedly one of the highlights on the new legislation.

    For further information in relation to Federal Law No. 6 of 2018 and arbitration in the UAE, please contact caschipperton@davidsoncolegal.com

  • Legal Update

    UAE set to introduce ‘Good Samaritan’ law in 2019

    Good Samaritan law 2019

    The Rescuer Protection Law, recently approved by the UAE Ministry of Health and Prevention, will allow bystanders to offer aid in medical emergencies without fear of legal punishments.

    With Abu Dhabi Police previously stating that it is an offence to provide assistance without being trained in first aid, medical professionals in the UAE have advised that the general public are often reluctant to intervene in emergency situations for fear of prosecution. It is therefore hoped the law will boost survival rates and encourage the public to provide assistance in life-threatening situations.

    A large public campaign to raise awareness of the new law is expected and community services centres will be introduced to train UAE residents in providing lifesaving assistance in emergencies.

    The law will be sent to the UAE Cabinet for final approval within the next two weeks and is expected to be introduced shortly after.

  • Employment/ Legal Update

    Terminating an unlimited term contract under Article 117

    Terminating an unlimited term contract under Article 117

    Federal Law number 8 of 1980 (as amended), colloquially known as the UAE Labour Law, regulates all employment contracts in the UAE, with the exception of certain ‘offshore’ jurisdictions such as the Dubai International Financial Centre or Abu Dhabi Global Market. It is therefore a fundamental piece of legislation, the understanding of which is essential to both employees and employers alike.

    The UAE Labour Law distinguishes between two types of employment contracts; limited term and unlimited term. In their basic forms, the contracts are as the name suggests; limited term contracts specify a fixed term and an end date, and unlimited term contracts are open ended and therefore seen as more flexible. Different articles relate to the termination of the two separate contract types, and for the purposes of this commentary, we will review one of these articles – article 117 – one of the two main ways in which an employer may lawfully terminate an employee’s unlimited term contact.

    Article 117 stipulates that there must be ‘valid grounds’ by which either an employer or employee can terminate an unlimited contract. These ‘valid grounds’ are not defined, although the UAE Labour Law does specify that they must be work related when seeking to be relied upon by the employer, and from previous judgments, the Labour Courts have been willing to accept poor performance or misconduct as a ‘valid reason’. Where an employee is terminated for a valid reason, they are entitled to their full end of service gratuity and other entitlements under the law.

    Where a company fails to comply with the UAE Labour Law provisions regarding termination, they may be found to have arbitrarily dismissed the employee, and subject to a penalty of between 1-3 months compensation based on an employee’s full final salary. The penalty is at the court’s discretion, usually having regard to the specifics of each case; eg. length of employment, seniority etc.

    Under the terms of article 117, a minimum mandatory notice period of thirty days is also prescribed, during which an employee is entitled to their full pay and benefits, and are still bound by the terms of their employment contract. Failure to abide by the notice period, by the employer or employee, opens up the possibility for a payment in lieu of notice. Whether the employer wishes the employee to remain an active part of the business during the notice period, or decides that gardening leave is more appropriate, is a matter of company policy. The requirements of an employee on notice should be set out clearly so as to avoid dispute, and should ensure that handover, and any other company requirements, happen during the notice period and specifically while the employee is still contracted with the company.

    The legal obligations on an employer do not end once article 117 has been satisfied, but having a coherent and well-drafted company policy that expands upon what ‘valid grounds’ are, provides for company work standards and details procedure on termination, can ensure that the termination process is as straightforward as possible. The best outcome in any termination is one whereby both the employer and employee know the process, and are committed to it.

    Where an employer is looking to rely on article 117 to terminate an employee, it is extremely important that the correct procedure is followed and the necessary paperwork is in place.

    For further information on article 117 or any other employment advice

    Christopher Chipperton
    +971 4 343 8897

  • Property

    Landmark Acquisition deal with one of UAE’s largest real estate developers

    Landmark Acquisition deal

    Davidson & Co has acted for one of the Middle East’s leading construction companies in a share acquisition (valued at AED 230,000,000) from one of the largest real estate developers in the UAE with a prominent international presence.

    Our team worked together to complete this complex transaction within a demanding time frame. We delivered a range of contractual documentary suites that provided the framework and platform to facilitate the overall transaction. From the negotiation stages up to completion we worked together with the developer’s lawyers to achieve a successful completion and meet our client’s needs in advance of their expected timeframes.

    This was a significant deal and we are very pleased to have worked with our client in helping deliver an excellent outcome for all concerned. The transaction allowed us to showcase the strength and depth of our local commercial and industrial expertise and our unrivalled M&A practices.

    Managing partner, Jonathon Davidson commented, “This acquisition represents a significant milestone in our client’s regional expansion. The matter allowed us to demonstrate our deep understanding of the real estate and construction sector and we are thrilled to have had the opportunity to work with one of the Middle East’s leading construction companies on this transaction.”

    Reach out to us for a confidential discussion on Mergers and Acquisitions or general Corporate matters and to find out how we can help.

    Our team would be delighted to hear from you.

    Rhea Bindra

    Yousif Ahmed

  • Economy

    Major JV between China and Iran


    Davidson & Co’s Corporate and Commercial team has been providing local and international clients with legal services for over ten years. Our Corporate and Commercial division has a growing clientele base that includes local, regional and international companies, banks and financial institutions, international and regional law firms and high-net-worth individuals.

    Recently, we acted in a corporate restructuring involving the establishment of a joint venture company and multiple share transfers to facilitate the investment by a major state-owned petroleum energy and chemicals company in China of over USD 500,000,000 in a long-established methanol plant based in Iran.

    This joint venture marks the Chinese entry into the Iranian methanol market. The above corporate restructuring is expected to significantly boost annual revenue generated in Iran and China.

    Our team on this transaction comprised of Partner, Andrew Lyons and Associate, Rhea Bindra. Managing Partner, Jonathon Davidson commented: “We are delighted to have continued our long-standing relationship with our clients based in Iran, by acting on yet another successful corporate restructuring, which is expected to prove a very progressive move for them in the Iranian and Chinese markets.”

    This transaction is another indication of continued M&A activity, which we are seeing within the oil and gas sector. The matter allowed us yet again to demonstrate our deep understanding of the realm of corporate and commercial law in the region and abroad.

    We aim to simplify the issues involved with transactions and make it our focus to help our clients understand their investment risks, at every stage.

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

    Our team would be delighted to hear from you.

    Rhea Bindra

    Yousif Ahmed

  • 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

    Yousif Ahmed

  • 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

    Yousif Ahmed

  • 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