UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for January 23, 2011

National Commercial Law Assessment Report for the UAE

 

 

By the Arab Center for the Rule of Law and Integrity – ACRLI with the Support of the Middle East Partnership Initiative

 

http://www.arabruleoflaw.org/compendium/Files/MENACLS-NationalReport-UAEEn.pdf

 
 Excerpt Regarding the “Anti-Fronting Law”
  
 

“Nevertheless, on the scale of the legal issue in this regard, it must be pointed

out to provisions of Federal Law No (17) of 2004 Concerning the Combating of

Commercial Concealment (the “Anti-Fronting Law”).

 

Such law is aimed at fighting concealment or screening i.e. “enabling a foreigner,

whether natural or artificial, to carry on any economic or professional activity not

allowed to be carried on by him,whether for his own account or with the participation

of a third party, in accordance with the law and decisions in force in the UAE,

or to enable the foreigner to evade his obligations”.

 

Indeed, the Anti-Fronting Law forbids the quasi- established practice of “front

names” in commercial activities (in other terms it is aimed at fighting the

practice of having a UAE sleeping partner and serving only as a sponsor to non

UAE nationals) and sets forth sanctions upon the UAE national acting as a

front name for the non UAE national and upon this latter as well. Fines that

may be inflicted to the UAE national involved in such practice may go up to

AED 100.000 (27.397 USD) for each activity. In the event of reiteration of the

infringement jail may be the sanction. Same shall apply to the non UAE

national, which further may be subject to revocation of license, imprisonment

(two years maximum) and deportation.

Nonetheless, this Anti-Fronting Law which was supposed to come into effect

in November 2007 shall not be enforced before March 2009 further to another

postponement to its application. It is believed that this Law shall not enter into

force until the Companies Law restriction on foreign equity ownership beyond

the 51% and other similar restrictions are amended. Still and save the many

critics addressed to such law, it can be said that unless such law comes into

effect and is clearly tested before courts, the consequences of its

implementation may not be predicted nor anticipated. In the meantime, the

practice of front names reflected through side agreements remains a common

practice applied all over the UAE.”

We can assume this law came into affect on 1 Jan 2010 in the UAE , however, it remains untested to date.

FEDERAL LAW NO . 17

Issued on 1/11/2004

Corresponding to 8 Ramadan 1425 H .

CONCERNING COMBATING COMMERCIAL CONCEALMENT

We , Zayed Bin Sultan Al Nahyan , President of the United Arab Emirates State ,

Pursuant to the perusal of the Constitution ; and

Federal Law no . 1 of 1972 , regarding the Jurisdiction of Ministries and the Powers of the Ministers and the amending laws thereof ; and

Federal Law no . 5 of 1975 regarding the Commercial Register ; and

Federal Law no . 4 of 1979 regarding Quashing Adulteration and Fraud in Commercial Transactions ; and

Federal Law no . 18 of 1981 regarding regulation of Commercial Agencies , and the amending laws thereof ; and

Federal Law no . 8 of 1984 regarding Commercial Companies , and the amending laws thereof ; and

Federal Law no . 9 of 1984 regarding Insurance Companies and Agents , and the amending laws thereof ; and

The Penal Code issued by Federal Law no . 3 of 1987 ; and

The Penal Procedural Code issued by Federal Law no . 35 of 1992 ; and

The Commercial Transactions Law issued by Federal Law no . 18 of 1993 , and

Federal Law no . 18 of 1995 regarding Simple Crafts , and

Acting upon the proposal of the Minister of Economy and Commerce , and the approval of both the Council of Ministers and the Federal National Council , and the ratification of the Federal Supreme Council ,

Have promulgated the following Law :

Article 1

In applying the provisions of this Law , the following terms and words shall have the meanings stated opposite to each unless the context indicates otherwise :

The State : The United Arab Emirates State .

The Ministry : The Ministry of Economy and Commerce .

The Minister : The Minister of Economy and Commerce .

The competent authority : the Local authority in the concerned Emirate .

The committee : The committee of combating commercial stimulation .

Concealment : Enables the foreigner – whether physical or juristic person – from carrying out any economic or professional activity not allowed to be carried out according to the laws and regulations in effect in the State whether to his account or in participation with third parties , or enables him to evade the liabilities resting upon him .

The Concealer : Every physical or juristic person who enables the foreigner – whether physical or juristic person – to carry out any economic or professional activity prohibited to be performed by him within the State .

The concealed : Any foreigner – whether physical or juristic person – carries out , with the aid of a concealer , any economic or professional activity prohibited to be carried out by him in the State with the aid of the concealer .

Article 2

Concealment of any foreigner is prohibited – whether physical or juristic person – and whether it is carried out by using the name , the license , the commercial register of the concealer or by any other means in the light of the definition of concealment mentioned in Article 1 of the present Law .

Article 3

Without prejudice to any severer penalty specified by any other law , the concealer shall be sentenced to a fine not in excess of one hundred thousand Dirham . The fine shall be repetitive by the number of the activities concealed . In case of recurrence , the penalty shall be imprisonment of the concealer for a period not exceeding two years and by a fine of one hundred thousand Dirhams .

The concealed person shall be liable to the same sentence together with his deportation from the State after execution of the penalty and payment of the liabilities due by him .

Article 4

The condemnation according to the provisions of the preceding Article shall result in striking off the entry of the concealed from the commercial register regarding the activity concealed , and cancellation of the license granted to him , in addition to depriving him from carrying out this activity for a period that may range between two years and five years as of the date of the judgment .

The abstract of the judgment shall be published at the expense of the condemned person in two daily newspapers issuing in the State provided that one is in Arabic .

Article 5

The Official assigned to control the implementation of the provisions of this Law and its implementing regulations designated by a decision given by the Minister of Justice and Islamic Affairs and Endowments in agreement with the Minister and the competent authority shall have the capacity of judicial officers to detect any violation to the provisions of this Law , and its implementing regulations and decisions , they shall be empowered to review all the records and documents of the relevant economic and professional activities .

Article 6

The Minister shall issue the regulations and decisions required for the implementation of the present Law in coordination with the competent authorities .

Article 7

This Law shall be published in the Official Gazette and shall come into force three years subsequent to its publication .

Promulgated by Us at the Presidential

Palace in Abu Dhabi

On 8 Ramadan 1425 H .

Corresponding to 1/11/2004

Zayed Bin Sultan Al Nahyan

President of the United Arab Emirates State

This Federal Law has been published in the Official Gazette , issue no . 422 , page 11 .

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance