• Legal Update

    ADGM issues new rules permitting litigation funding

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    The Abu Dhabi Global Market (“ADGM”) Courts have recently issued legislation which expressly allows for third-party litigation funding in what they describe as a “first” in the Middle East and North Africa (“MENA”) region.  The introduction of the “Litigation Funding Rules 2019” follows a public consultation and review of existing frameworks in jurisdictions such as the United States, England and Wales, and Hong Kong.

    Litigation Funding is a process which enables third parties to bear the costs of litigation in exchange for an agreed proportion of the eventual recovered sum. Litigation Funding Agreements (“LFA”) share certain similarities with Conditional Fee Agreements (“CFA”) or ‘no-win-no-fee’ arrangements. Both an LFA and CFA ensure that the Litigant does not bear certain upfront and/or ongoing costs in respect of the litigation, in exchange for the Litigant agreeing to part with a sum or percentage of their final payout. The main difference between a CFA and LFA is that under an LFA, a third party to the litigation (the Funder) covers the agreed upfront costs and/or ongoing costs.

    The Chief Justice of the ADGM Courts commented that the legislation aims “to strike a balance between litigants’ needs for the financing of their proceedings to ensure access to justice, the legitimate commercial interests of Funders, and promoting transparency of the Funder’s role for the benefit of consumers of these resources.” The new rules do so by providing for the minimum terms to be included in an LFA such as liability to pay insurance premiums, the amount of funding and its scope, and timings with regards to the advance of tranches. The legislation contains provisions which also regulate settlement of funds, LFA termination procedures and provide that the ADGM is the correct forum and jurisdiction for disputes arising from AGDM LFAs.

    The new framework is yet another progression in the UAE legal sector, following the DIFC Courts’ Practice Direction No. 2 of 2017 which established a framework for funding claims in the DIFC Courts, and the long-awaited amendment to DIAC Arbitration Rules, which will acknowledge third party funding.

    For further information in relation to the ADGM or the new rules permitting litigation funding, please contact caschipperton@davidsoncolaw.com

  • Employment/ Legal Update

    All UAE workers entitled to 14 public holidays in 2019 and 2020

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    The UAE government has taken the decision to remove the distinction between private sector and public sector in terms of public and national holidays. Previously the public sector had been granted more public holiday than the private sector every year, and the decision is seen as one designed to encourage more Emiratis to enter into the private sector.

    All workers in the UAE for the next 2 years are therefore entitled to 14 days public and national holiday.

  • Legal Update

    Middle East Legal Awards 2019

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    Davidson & Co are delighted to announce that two of our lawyers have been shortlisted for awards at the Middle East Legal Awards 2019.

    Scottish duo Yousif Ahmed (‘Rising Star’ category) and Victoria Smylie (‘Most Promising Newcomer’ category) have been recognised for their outstanding legal work and contribution over the last year.

    The firm’s founding partner, Jonathon Davidson commented “For two of our lawyers to receive nominations and be shortlisted for awards at such a prestigious ceremony is a testament to the quality of our team as a whole. Well done to our nominees and to all those in the firm who have supported them. Congratulations, as well, to all of the other firms and individuals involved!

    The awards ceremony will be taking place on Thursday 18 April 2019 at the Ritz-Carlton in JBR, Dubai.

  • 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
    caschipperton@davidsoncolaw.com
    +971 4 343 8897

  • Employment/ Legal Update

    New labour insurance initiative to enhance rights of employees and free up cash liquidity for UAE companies

    New labour insurance initiative

    From 15 October 2018, the UAE Cabinet has announced a new labour deposit scheme initiative which will enhance the rights of employees and free up cash liquidity for UAE companies.

    Currently, for each new employee hired, a company is obliged to pay an AED 3,000 deposit to the Ministry of Labour as a way of securing that employees receive all or part of their entitlements due and payable at the end of their termination of employment, such as end of service gratuity, holiday pay and payment in lieu of notice, if a company is unable to pay,

    Typically however, the structure of the current deposit scheme is limited to the value of the deposit and as a result, those employees who are owed significantly more than AED 3000 on the termination of their employment, are left with a substantial shortfall in the event that their employer is unable to meet the applicable payments.

    From 15 October 2018, the proposed new deposit scheme will drastically reduce the deposit payable by employers to just AED 60 for each new employee, thereby significantly reducing the upfront costs of recruiting staff, together with releasing liquidity which is currently tied up in the Ministry of Labour.

    Furthermore, the new system entitles employees to payouts of up to AED 20,000 by raising the insurance coverage, a marked increase on the current deposit amount, and fantastic news for all workers in the region, particularly vulnerable blue-collar workers.

    As with any insurance policy, successful claims may lead to increased premiums however for now, both businesses and employees alike will benefit from the new deposit scheme.

    For more information on company set up in the UAE or any other legal requirements please contact:

    Finlay Donaldson on +971 4 343 8897

  • Corporate Law/ Family Law/ Legal Update/ Wills

    DIFC Wills Service Centre launches new Business Owners Will

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    The DIFC Wills Service Centre (DIFC WSC) has launched a new Business Owners Will to encompass both free zone and UAE onshore company shares (including RAKICC registered companies). The Business Owners Will replaces the DIFC WSC’s Free Zone Company Will, which was previously available to encompass only free zone company shares.

    The new purpose Will can encompass up to five separate shareholdings in any free zone or UAE onshore company incorporated in the Emirates of Dubai and/or Ras Al Khaimah, and will enable non-Muslim testators over the age of 21 to designate which beneficiary(ies) they wish their company shares to be transferred to on their passing. There are many advantages to ensuring that there is a succession plan in place with regards to the ownership and management of any company, including business continuity, sustainability, and reassurance that the business will be left in capable hands.

    The introduction of the Business Owners Will is intended to allow testators to take advantage of the proposed changes to the foreign ownership system of UAE based enterprises, announced by the Cabinet early this year. Once implemented, the new law will allow certain foreign investors to have 100% sole ownership of their enterprise, bringing the position of onshore LLC companies in line with existing free zone and offshore entities.

    The Business Owner Will is available to both UAE residents and foreign investors, and can be registered in person or via the DIFC WSC’s online Virtual Registry.

    For further information on the Business Owner Will or any of the DIFC WSC’s wills, please contact Victoria Smylie or Finlay Donaldson on +971 4 343 8897.

     

  • Corporate Law/ Family Law/ Legal Update/ Private Client

    Davidson & Co admitted to prestigious Legalink global network

    Legalink Secondary Signature Full Tagline on White[1]

    Davidson & Co is delighted to announce that the firm has been admitted into the prestigious Legalink network, a global legal network comprising more than 60 individually approved and selected law firms from around the globe.

    Davidson & Co prides itself in its ability to offer a full service to clients, and by becoming a member of Legalink, Davidson & Co is now in a position to not only offer clients in-depth legal knowledge of proceedings in the UAE, but also access to dependable, first-hand legal advice from over 3,000 professionals worldwide.

    Davidson & Co recognises that in our ever expanding and internationalised economy, our clients’ private wealth and assets are no longer confined to one jurisdiction, and this most recent accolade cements the firm’s goal to understand the needs of its clients, add value whenever possible, and to ensure ongoing development and success.

    Further information on Legalink or its members can be found at https://www.legalink.ch.

    Alternatively, please contact either Victoria Smylie at vsmylie@davidsoncolaw.com, or Yousif Ahmed at yahmed@davidsoncolaw.com, both of whom would be delighted to answer any questions you may have on the network.

  • Family Law/ Legal Update/ Private Client

    Enactment of the DIFC Foundations Law 2018 – enhancing succession planning and wealth structuring platforms in the region.

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    The long-awaited Dubai International Financial Centre (DIFC) Foundations Law 2018 (DIFC Law No 3 of 2018) has now come in to effect as of 21 March 2018. The new law, which is in addition to the pre-existing DIFC Companies Law and the newly reformed DIFC Trust Law, is intended to provide an enhanced framework for succession planning and wealth structuring platforms in the region.

    What is a Foundation?

    A Foundation is an incorporated legal entity, viewed as a hybrid between a company and a trust. Similar to that of a company, a Foundation is deemed to have a separate legal personality however, rather than being owned by shareholders or members, a Foundation is self-owned and administered by its Council, in accordance with the Foundation’s by-laws.

    A Foundation is established when the Founder places assets in to the Foundation to be used in accordance with designated purposes and objects.

    DIFC Foundation Categories

    The DIFC Foundations law provides for four categories of Foundations based upon their objects; 1) objects which are exclusively charitable; 2) objects which are not charitable; 3) in order to provide benefits to persons identified in its Charter or By-laws and; 4) a combination of the above. For all categories of Foundations, commercial activities must not be carried out, except where deemed necessary for, and ancillary or incidental to. the Foundation’s objects.

    Different governance requirements will apply depending on which Foundation is created.

    Key Benefits

    • Flexibility
    • Degree of control maintained by Founder
    • Family involvement
    • Maintain family ties for geographically diverse families and/or assets
    • Continuity
    • Separate Legal Personality
    • Independent
    • Robust governance structure
    • Facilitates philanthropy

    Who will benefit from the DIFC Foundations Law?

    Foundations can be created for a variety of purposes, whether it be to assist the multi-generational family with asset protection, the High Net Worth individual with geographically diverse assets, an individual or family with philanthropic objectives, or a company or family office wishing to restructure, the DIFC Foundations regime is a welcome introduction for individuals, families, businesses, and entrepreneurs alike both locally and globally.

    For further information on DIFC Foundations please contact Victoria Smylie on +971 4 343 8897 or vsmylie@davidsoncolaw.com