UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for January 14, 2010

UAE Property Visa

From 01 June 2009, the UAE has implemented a new system of residence visas for UAE property owners, whereby which property owners can stay in the UAE for up to six months at a time.    The property visa can be renewed indefinitely but the visa holder must exit the UAE each time to re-apply.  The cost of the six-month property visa is AED 2,000 with the renewal cost being the same.  The Developer cannot guarantee the visa but can apply for the visa on the owner’s behalf to the Department of Naturalization and Residency, which makes the final decision.

Ministerial Decision No. (281) of 2009 amending some provisions of the Executive Regulations of the Entry and Residency Law for Entry and Residency of Foreigners” was issued at the federal level to specify the rights and obligations of property owners in relation to residency visas.

A new paragraph has been added to Article 33 of the ‘Executive Regulations of the Entry and Residency Law for Entry and Residency of Foreigners’ and a new article, Article 34, has been included in the by-law specifying the conditions of the new visa.

The amendment to Article 33 states:

“Owners of built-in properties can stay for six months from the date of entry into the country. On the expiry of this period, the owner pledges to depart for his homeland or any of the GCC countries.  He will only be allowed to enter the country again after meeting the required conditions.”

According to the new Article 34, the owner should submit a multi-trip entry visa in regards to the property as per the following conditions:

  1. “The property should be built-in (complete) and in this case doesn’t include owners of vacant lands, plots, or off-plan Units.
  2. The owner should obtain a title of the property from the property registration authority in the emirate concerned.
  3. The Unit must be wholly owned by the concerned person.
  4. The value of the unit should be at least Dh 1 million (USD$270,000).  The Ministerial Decision did not clarify the basis on which the property is to be valued, however, the most practical way to value the property is by using the amount stated in the sale and purchase agreement or the purchase price.
  5. The unit should be fit for accommodation and the property must be of an appropriate size to house family members in a reasonable ratio of people to square feet.
  6. The owner should have a fixed income of at least Dh 10,000 (USD$ 2722) per month or its equivalent in foreign currencies whether inside or outside the country.  Not all sources of income are acceptable but examples of an acceptable income generated in the UAE are interest from bank accounts and income coming from stock dividends.  It is important to note that the property visa doesn’t give the owner of the property the right to work inside the UAE, however, only to reside in the UAE.”

Direct family members including spouse and children can be included under the property owner’s sponsorship.  UAE medical insurance is required for all applicants.

Furthermore, joint property owners cannot apply for residence visa in contrast to the  previous system which allowed first named owner to apply.  Previously in joint -ownership cases, a residency visa was granted to the first named person on the title deed.  Now the applicant must be the only owner of the property.  The exception is  joint -ownership between husband and wife, where in which the husband as an applicant will be eligible with his family members for property visas.

Property  visa holders under the old system must change their visa to the new system from 01 June 2009 or they risk breaching UAE immigration laws and facing the resulting penalties.

Contracting in the UAE

 

Are you an overseas contractor coming to the UAE to undertake a project under the sponsorship of a UAE company?  There are certain provisions of the law which you should be aware of before embarking on your journey to the UAE, a modern land of contrasts situated at the crossroads of the world where Islam is the prevalent religion and influence on the local culture. 

A standard clause which you may find in your contract regarding respecting customs and laws of the UAE may look like this:

Use reasonable efforts during work hours to ensure that its supervisors and staff do not engage in activities prejudicial to the Buyer or the Project and at all times observe and comply in all respects with all customs, laws, statutes, regulations, by-laws for the time being in force in the United Arab Emirates and with all regulations, by-laws relating to the administration and operation of the Location.

This is a general clause which encourages foreign workers to respect Islam as well as Emirati culture.  This generally means no drinking at work and to dress appropriately in accordance with the standards of the UAE.  Some of these standards are enforceable under the law.  For example,  under Article 120(h) of the UAE Labor Law, Federal Law No. (8) of 1980, an employer may dismiss a worker without notice if the worker is found in a state of drunkenness or under the influence of a drug during working hours.   An employee can also be dismissed under the same law without notification (d) if the worker disobeys instructions respecting industrial safety or the safety of the workplace, on condition that the instructions are in writing and have been posted up at a conspicuous place and, in the case of an illiterate worker, that he has been acquainted with them orally.  If your sponsor requires a certain dress code, it would be advisable to ask them to specify the dress code in writing.  Furthermore, it would be advisable to request that the Sponsor be required to post the industrial safety instructions around the Work Site in conspicuous places.

It is important to note as well that workers are required to follow the norms of the job in the UAE even if not explicitly written in the contract.  Article 906 of Civil Transactions Law, Federal Law No. 5 of 1985 states:  “The worker shall abide by all that is considered by the norms to be associated with the work even if it is not included in the contract.”

A typical clause which you might see in regards to Labor Law, Residency Regulations, and Directions is as follows:

Observe and comply with the applicable laws, as specifically identified by Buyer in writing, regulating labor relations vis-à-vis its Supervisors and Staff, in addition to all applicable residency permits and visas as well as any reasonable directions issued by the Buyer with reasonable advance notice subject to the requirement that the Buyer shall bear any costs related to such directions.

In order to clearly identify your liability, it is advisable to request that the sponsoring company specify in writing exactly which UAE laws they expect you to comply with and perhaps compile a schedule of the laws in an Appendix to the agreement. 

Furthermore, it is advisable to share the obligation of complying with the UAE law with the Sponsor.  Therefore, it is in your interest to specify that the Sponsor has the responsibility to notify the Contractor if any non-compliance of law has taken place and to state that the Contractor must verify such alleged non-compliance and then that the Contractor has a thirty-day period in which to rectify such non-compliance with UAE law.   A sample clause might look as follows:

The Seller understands and agrees that the information stated in Appendix I is a summary of the labor and immigration requirements in the UAE and further agrees to use commercially reasonable efforts to support the Buyer in abiding by any other current or future requirements by the relevant authorities as indicated in writing by the Buyer.  In the event that the Buyer becomes aware that the Seller is not complying with UAE laws, the Buyer shall give written notification to the Seller of such non-compliance, specifying which law and how the law is being breached and allowing the Seller to verify such non-compliance in addition to thirty (30) days to rectify the non-compliance if non-compliance exists. 

It is also advisable to request the Sponsor to provide the employees of the Contractor with UAE health insurance while the Contractor is in the UAE conducting the Project.  The Sponsor can invoice the Contractor and Contractor can pay for and subscribe to the insurance prior to the commencement of the Project, and hence the Sponsor’s workmen will be covered by health insurance during their tenure in the UAE.   Such clause may look like this:

The Buyer will arrange for health insurance to cover the period of the Project for the Seller’s employees in accordance with the relevant UAE laws and the Buyer shall invoice the Seller for such insurance and the Seller shall pay the costs of such insurance before the Seller’s employees arrive in the UAE and commence the Project. 

It is advisable to add a clause in the agreement which states that if you become unable to complete the job for reasons beyond your control, you shall be entitled to the value of the completed work and to the expenses incurred in the course of the execution of the project to the extent of the benefit acquired by the Sponsor.

According to Article 894 of Civil Transactions Law, Federal Law No. 5 of 1985,

If the contractor starts the execution and then becomes unable to complete the job for reasons beyond his control, he shall be entitled to the value of the completed work, and to the expenses incurred by him in the course of the execution to the extent of the benefit acquired by the client.

In general, it advisable to ensure that the contract clearly states the rights and obligations of both parties and that the indemnifications are fair and mutual.  Furthermore, have your agreement reviewed by local lawyers to ensure that the agreement will secure your interests and minimize disputes, however, at the same time clearly defines a proper dispute resolution process for the UAE.

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance