The ADGM Court of Appeal considered the application of English common law and the doctrine of binding precedent in decisions of the ADGM Courts in AC Network Holding Limited & Ors v Polymath Ekar SPV & Ors [2023] ADGM CA 0002. 

English common law, as it stands from time to time, applies in the ADGM, according to the ADGM Application of English Law Regulations 2015. Overturning the decision of the lower court in which the trial judge had determined that the court was not bound, by virtue of the doctrine of precedent, by a decision of the English Court of Appeal (such decisions being only “highly relevant”), the ADGM Court of Appeal determined that the ADGM Application of English Law Regulations 2015 requires that judges of the ADGM Court must have regard to precedent established by decisions of the English Courts. 

The ADGM introduced the Distributed Ledger Technology (“DLT”) Foundations Regulations 2023 in November 2023, which is the first regime of its kind globally. The DLT Foundations Regulations provide a comprehensive framework for DLT Foundations (legal entities established to use, deploy, develop, facilitate or support DLT or to issue tokens). The regime is designed to be suitable for Blockchain Foundations, Web3 entities, Decentralised Autonomous Organisations and traditional Foundations seeking to enhance their operations through DLT. It enables them to operate and issue tokens. It facilitates organisation, transparency and promotes governance whilst recognising the industry’s need for decentralisation. DLT Foundations must have a registered office in ADGM, appoint a company services provider, have a charter, comply with governance, accounting and audit, record-keeping and beneficial ownership and control disclosure requirements. The regime is in line with ADGM’s strategy to foster initiatives in the broader blockchain and digital asset industry and follows a public consultation with DLT industry participants.

Updated ADGM Beneficial Ownership and Control Regulations 2022 were issued in October 2023, which repeal and replace the existing ADGM Beneficial Ownership and Control Regulations 2018. The changes introduced by the ADGM Beneficial Ownership and Control Regulations 2022 are intended to address money laundering and terrorist financing risks and align the ADGM’s regime more closely with the Financial Action Task Force (FATF) standards and requirements.

The DIFC’s Sustainable Finance Framework was published in September 2023. It sets out the DIFC’s framework for the issuance of green, social or sustainability bonds, sukuk, loans and other debt instruments.

Under the framework, the DIFC commits to allocating an amount at least equivalent to the net proceeds of financing instruments issued under the framework to finance or refinance eligible projects within three years of issuance. The framework comprises eligible green projects (ranging from clean transportation to sustainable water and wastewater management) and eligible social projects focussed on employment generation and socioeconomic advancement and empowerment. The framework sets out transparent eligibility criteria for all projects, and a Sustainable Finance Committee will evaluate the eligibility of projects proposed. The Sustainable Finance Committee will review the framework on a regular basis.

S&P Global Ratings, in its Second Party Opinion (SPO), provided ‘strong’ opinions on the DIFC Sustainable Finance Framework’s process for project evaluation and selection and reporting. S&P also expressed the view that the framework is aligned with various international standards including Social Bond Principles (SBP), ICMA, 2023 and Green Loan Principles (GLP), LMA/LSTA/APLMA, 2023, among others. The DIFC's Sustainable Finance Framework should contribute to certain of the United Nations Sustainable Development Goals (SGDs), including Sustainable cities and communities and Affordable and clean energy. 

The framework aligns with DIFC’s Strategy 2030, the Dubai Economic Agenda D33 and the UAE Sustainable Goals 2030. It also follows the implementation of the ADGM’s Sustainable Finance Framework in July 2023. You can read more about this development in our previous article.

You can read more about global ESG developments in our ESG Legal Outlook 2023 and our Sustainable Futures blog. 

In its judgment in (1) Sandra Holding Ltd, (2) Nuri Musaed Al Saleh (together the “Respondents”) v (1) Fawzi Musaed Al Saleh (2) Ahmed Fawzi AL Saleh (3) Yasmine Fawzi AL Saleh (4) Farah El Merabi (together the “Appellants”) [2023] DIFC CA 003, the DIFC Court of Appeal overturned a Worldwide Freezing Order (“WFO”) issued by the DIFC Court of First Instance on the basis that the DIFC Courts did not have jurisdiction to grant the WFO against parties who had no jurisdictional nexus to the DIFC.

The case involved an application by the Appellants to the DIFC Courts for a WFO to prevent the loss of assets pending the determination of ongoing proceedings in Kuwait. In this case, the parties were not licensed in the DIFC, no contracts were performed in the DIFC and there were no assets in the DIFC. The Respondents disputed the DIFC Court’s jurisdiction to issue the WFO.

The DIFC Court of Appeal considered the DIFC Court’s  jurisdiction to issue the WFO in such circumstances where the DIFC Courts did not have jurisdiction according to the gateways set out in The Law of the Judicial Authority at Dubai International Financial Centre (Dubai Law No.12 of 2004) (the “Judicial Authority Law”) and whether it was within the Judge’s remit to exercise the powers granted to him under the Rules of the DIFC Courts to impose a WFO against the Appellants.

The DIFC Court of Appeal determined that it did not have jurisdiction over the Appellants, and the WFO must fail and be dismissed. In reaching this decision, the Judge noted that the Appellants “have no assets in the DIFC, and they owe no allegiance to the DIFC Court by way of domicile, residence or some other apparent reasons, nor any other connection with the DIFC Courts upon which the Respondents can claim in personam jurisdiction for the DIFC Court to appropriately grant the WFO”.

The Appellants asserted that even if the Respondents failed to establish that the DIFC Court has jurisdiction, the DIFC Court ought still to consider the proper limits of its jurisdiction when granting extraterritorial orders by reference to international comity. The Judge noted that when the DIFC Court is requested to grant a WFO it needs to take into certain discretionary factors. The issue of discretion will only arise if the DIFC Court is satisfied there is prima facie jurisdiction over the Appellants. Where the jurisdictional threshold is not met, the DIFC Court would consider granting an injunction which extends to foreign assets only in exceptional circumstances. In this case, the DIFC Court was not satisfied that it was just and expedient to grant such a WFO over assets located outside the DIFC Court’s jurisdiction simply on the assumption that the Appellants would take the necessary steps to comply with the order, and therefore it was not appropriate for the DIFC Court to grant the WFO when there was a reasonable prospect that it would not be enforced.

The new Competition Law (Federal Decree-Law No. 36 of 2023) introduces modifications to aspects of the UAE’s competition regime with effect from 28 December 2023 and repeals Federal Law No. 4 of 2012. 

Anti-competitive agreements, abuse of a dominant position and control of economic concentrations are regulated. The regime also now regulates predatory pricing and abuse of economic dependence. It applies to economic activities (which concept is now broadened to include all activities relating to the production, distribution and provision of goods and products) carried out in the UAE or overseas activities which affect competition in the UAE.

Sector-based exemptions may apply where the relevant regulator for a sector is responsible for regulating competition matters under applicable laws, moving away from the specific sector exemptions under the previous regime. Government-owned entities may still be exempt, but only to the extent they are specifically identified by Cabinet decision. There is no longer an exemption for small and medium sized businesses. 

On application, the Minister of Economy has a discretion to grant exceptions to restrictions on anti-competitive agreements, abuse of a dominant position, economic dependency and predatory pricing, where the activity may have a positive economic impact (such as promoting economic development, improving the relevant entity’s performance and competitiveness or benefiting the consumer), on certain conditions including that it does not lead to the exclusion of competition in the relevant market or a significant part of it. 

While many aspects of the economic concentration rules remain the same, an application for approval must be made where a proposed economic concentration may affect competition in a relevant market, based on total market share (as under the previous regime) or total annual sales value. Thresholds are to be determined by the Council of Ministers.

There are also new rights for interested parties to file objections to proposed economic concentrations, and the changes to fines that may be imposed as penalties for breach of the law. 

According to the new Competition Law, implementing regulations are to be issued within 6 months from the date the new Competition Law comes into force. Implementing regulations made under the existing Competition Law will continue in effect until replaced by new regulations made under the new Competition Law.

The UAE’s new Bankruptcy Law, Federal Law Decree No.51 of 2023 concerning Financial Restructuring and Bankruptcy (the “Bankruptcy Law 2023”) was published in the Official Gazette on 31 October 2023 and is due to come into force on 1 May 2024 (6 months from the date of publication in the Official Gazette). When it comes into force, the Bankruptcy Law 2023 will repeal the previous Bankruptcy Law, Federal Decree-Law No. 9 of 2016 on Bankruptcy. It will apply across all seven emirates comprising the UAE.

The Bankruptcy Law 2023 represents a more rescue-focussed refinement of the outgoing regime set out in the Bankruptcy Law 2016, which was the UAE’s first stand-alone insolvency law enacted amid a global wave of insolvency reform in the wake of the financial crisis.

Under the Bankruptcy Law 2023, there are three main procedures:

• Preventive settlement: This replaces the previous preventive composition procedure. This is a pre-insolvency, “debtor in possession” rescue regime for debtors, where the business is still viable. Only the debtor can apply for preventive settlement proceedings.
• Restructuring: A post-insolvency rescue procedure for debtors where the business is still viable. An application to open restructuring procedures may be submitted by the debtor, creditors, or any relevant supervisory authority to which the debtor is subject.
• Bankruptcy: A regime for insolvent debtors, for debtors for whom restructuring is not appropriate because the business is no longer viable. An application to open bankruptcy procedures may be submitted by the debtor, creditors, or any relevant supervisory authority to which the debtor is subject. The debtor’s business will be liquidated, or if possible, rehabilitated. 

There is no longer a common bankruptcy application, as a gateway leading to either restructuring or liquidation. There are new common provisions relating to applications for procedures. There will be more centralised administration of proceedings, with a new Bankruptcy Administration within the headquarters of the Bankruptcy Court and a new Financial Reorganisation and Bankruptcy Unit. Common thresholds for the required majority of creditors who must vote to approve any plans under the procedures will apply. 

Key recent changes to the UAE’s Arbitration Law allow greater use of modern technology in arbitration proceedings, including the option for virtual hearings, enhanced governance processes and ethical code of conduct for arbitrators and more flexibility for arbitral tribunals in managing the arbitration proceedings. Federal Decree Law No.15 of 2023 amending some provisions of Federal Law No.6 of 2018 on Arbitration was issued in September 2023, and is effective as of the day following its publication in the Official Gazette. 

The UAE’s new Trusts Law (Federal Decree-Law No.31 of 2023) sets out a more detailed regime for the establishment, registration, and administration of trusts in the UAE, following its enactment in September 2023. The new law repealed the existing Trusts Law, Federal Law No.19 of 2020. The Trust Law applies across the UAE, except for the DIFC and ADGM.

A trust is an arrangement set up by a trust founder or founders for the benefit of one or more beneficiaries comprising trust assets, which is administered by a trustee (or trustees). The trust deed establishing the trust must be in writing and meet the criteria as to form and content set out in the Trusts Law and must be approved by the Competent Authority in the relevant Emirate. The trust must be registered in a register maintained by the Competent Authority in the relevant Emirate. The Trusts Law sets out detailed provisions as to trustees, including as to their appointment, resignation, removal and dismissal, powers, obligations, delegation, reporting and record-keeping, independence, liabilities, fees, and expenses. Breaches of the Trusts Law may be punishable by fines and/or imprisonment. 

Implementing regulations made under the existing Trusts Law will continue in effect until replaced by new regulations made under the new Trusts Law. 

Federal Decree Law No. 40 of 2023, concerning Mediation and Conciliation in Civil and Commercial Disputes consolidates and streamlines mediation and conciliation frameworks at a Federal level. It repeals the Federal existing Mediation Law, Federal Law No.6 of 2021 and also Federal Law No.5 of 2021, which amended the provisions of Federal Law No.17 of 2016 governing conciliation and the establishment of court-annexed conciliation and mediation centre for civil and commercial disputes. The new Mediation and Conciliation Law came into force on 29 December 2023.

The UAE has enacted a new Insurance Law (Federal Law No.48 of 2023), which repeals and replaces Federal Law No.6 of 2007 (as amended) which came into force in November 2023. The Insurance Law applies across the UAE, except for the DIFC and ADGM. The new Insurance Law codifies the transfer of responsibility for the regulatory, supervisory, licensing and enforcement functions of the insurance sector  from the Insurance Authority to the UAE Central Bank, which took effect in 2020. Key changes relate to insurance dispute resolution, with the Banking and Insurance Dispute Resolution Unit (BIDRU) having jurisdiction to hear disputes in place of the previous Insurance Settlement Dispute Committee (IDC). 

The UAE has an enacted a new law to regulate finance leases, which will replace the current Finance Lease Law (Federal Law No.8 of 2018) with effect from March 2024. The regime regulates finance leases of assets located in the UAE (other than the DIFC and ADGM),  under which the lessor grants the lessee the right to hold and use an asset for a specified period in exchange for rental payments and the lessee has the option to purchase all or part of the leased assets. Bilateral and tripartite finance leases, and sub-lease agreements, are addressed in the new Finance Lease Law. Leased assets may include real estate units and moveable assets. Certain assets are expressly excluded from being subject to leasing under the new law, including airplanes, helicopters, marine vehicles, cash, or investment securities. The lease contract must set out the rights and obligations of each party and include at least the minimum information specified in the Finance Lease Law. The law regulates responsibility for loss or damage to the leased assets, maintenance, and licensing requirements. 

It is reported that the Dubai Court of Cassation decided in a recent judgment that an English Commercial Court judgment is enforceable in the Dubai Courts (Commercial Appeal No. 847/2023 issued on 7 November 2023).

There is no relevant enforcement treaty in place between the UAE and England & Wales. Among the various conditions to enforce foreign court judgments set out in the Civil Procedures Law (Federal Decree-Law No.42 of 2022), reciprocity is required for the UAE Courts to enforce a foreign court judgment. This case follows the issuance of a letter from the UAE Ministry of Justice (“MOJ”) to the Dubai Courts in which the MoJ instructed the Dubai Courts to consider that English court judgments meet the grounds of reciprocity for enforcement in the onshore UAE Courts. The MOJ letter refers to the decision of the English High Court in Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB) in which it was determined that a Dubai court judgment was capable of being enforced in the English High Court. The MOJ letter is not legally binding, but the Dubai Courts should take this into account when considering applications to recognise and enforce judgments issued by the English courts.

Commercial Appeal No. 847/2023 is the first publicised case in which an English Court judgment has been determined to be enforceable in the UAE, and reports indicate that it referred to the decision of the English High Court in Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB) as to matters of reciprocity.

From 1 February 2024, Abu Dhabi International Arbitration Centre (known as arbitrateAD) will operate as a new regional and global dispute resolution forum in the Emirate of Abu Dhabi. The governance structure and arbitration rules of arbitrateAD will replace those of the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC). New disputes will be administered by the arbitrateAD under its new arbitration rules, which are yet to be published. Pending cases under the existing rules of ADCCAC will continue to be administered by the ADCCAC. 

The UAE is consulting on new sustainability disclosure guidelines for financial institutions in consultation paper “Principles for Sustainable-Related Disclosures for Reporting Entities” published by the UAE Sustainable Working Group in September 2023. The UAE Sustainable Working Group comprises the UAE Central Bank, the Securities and Commodities Authority (SCA) the ADGM’s Financial Services Regulatory Authority (FSRA) and the DIFC’s Dubai Financial Services Authority (DFSA). The consultation paper comprises four principles that are to be treated as a minimum standard for their respective disclosure frameworks in relation to sustainability related matters. 

The principles are: 

1. Reporting entities should put in place adequate policies, procedures and systems allowing them to report on sustainability-related matters. 
2. In disclosing information about their sustainability-related risks and opportunities, reporting entities should consider including specified factors, such as materiality and comprehensiveness. 
3. Sustainability-related disclosures should reflect the way in which an entity operates, including in the areas of governance, strategy, and risk management, and incorporate relevant metrics and targets. The papers set out certain minimum disclosures (for example, governance, metrics, and targets) and notes that additional, specific disclosure requirements may apply depending on the type of reporting entity.
4. To improve transparency and quality of sustainability-related, product-level disclosures, market participants should consider the specified elements when dealing with and offering sustainability-related products, such as labelling and classification, marketing materials, monitoring, and reporting.

The objective of the disclosure principles is to help prepare relevant entities in the UAE to achieve greater transparency in Environmental, Social and Corporate Governance (ESG)-related reporting and disclosures, to inform investors. This consultation follows the UAE’s first set of Guiding Principles on Sustainable Finance published in January 2020. 

You can read more about global ESG developments in our ESG Legal Outlook 2023 and our Sustainable Futures blog.

The General Authority for Competition in Saudi Arabia (“GAC”) introduced changes to the thresholds for economic concentrations that trigger notification requirements. 

The GAC will now assess the total annual turnover threshold test for economic concentrations (such as mergers and acquisitions transactions) in more granular detail, taking into account the following three limbs:

1. the total global annual turnover of the undertakings participating in the economic concentration exceeds SAR 200m; 
2. the total global annual turnover of the target entity exceeds SAR 40m; and 
3. the total domestic annual turnover of the undertakings participating in the economic concentration exceeds SAR 40m.

The revised turnover thresholds should have the effect of excluding smaller transactions or those which insufficient connection to Saudi Arabia which do not meet the thresholds, from being notifiable to the GAC. 

The Government of Saudi Arabia is incentivising multinational companies to relocate their regional headquarters (“RHQ”) to Saudi Arabia, through the Regional Headquarters in the Kingdom of Saudi Arabia programme (“RHQ Programme”). The Council of Ministers introduced new rules which took effect on 1 January 2024 pursuant to Cabinet Decision No.461/1445 on the Approval of the Controls of Contracting between Government Agencies and Companies that Do Not Have a Regional Headquarters in the Kingdom issued on 26 December 2023 (corresponding to 13/6/1445H) (the “RHQ Rules”), replacing Cabinet Decision No.377/144 on the same subject which was issued last year.

The RHQ Programme was established as a joint initiative between the Ministry of Investment (“MISA”) and Royal Commission for Riyadh City (RCRC). Eligible entities may apply for an RHQ licence, which was set out in a new section of the MISA Services Manual issued in 2022. From 1 January 2024, Saudi Arabian government bodies, authorities and public institutions are restricted from entering into contracts with companies that do not have their RHQ in the Kingdom, except in accordance with the limited exceptions set out in the RHQ Rules. Various incentives are offered to multinational companies with an RHQ licence, including new tax incentives recently announced by MISA, the Ministry of Finance and the Zakat, Tax and Customs Authority. Multinational companies that relocate their regional headquarters to Saudi Arabia and obtain an RHQ licence shall be subject to a zero rate of tax (corporation tax and withholding tax) for a period of 30 years from the date on which the RHQ licence is issued.

The Zakat, Tax and Customs Authority (“ZATCA”) has published a new Tax and Zakat Procedural Law for public consultation, which comprises procedural and administrative requirements in relation to tax and zakat. The proposed new law addresses the taxation of legal persons, persons subject to tax, taxable income, tax on the income of the non-Saudi natural persons and withholding tax, among other things. 

ZATCA has published a new corporate income tax for consultation which, if enacted, would introduce changes to various aspects of the current regime, including in relation to residency rules, transfer pricing, tax incentives for green investments and withholding tax rates. 

The Capital Market Authority of the Kingdom of Saudi Arabia (“CMA”) has approved amendments to the Instructions for Companies’ Announcements (“Announcement Instructions") (issued pursuant to the CMA’s board resolution number (1-199-2006) dated 18/07/1427H (corresponding to 12/08/2006G), amended by the CMA’s board resolution number (3-79-2023) dated 19/02/1445H (corresponding to 04/09/2023G). The amendments to the Announcement Instructions came into force on 1 January 2024.

The amendments to the Announcement Instructions come as part of the CMA’s continuous efforts to develop and facilitate the disclosure procedures for companies listed on the Saudi Stock Exchange (Tadawul). The amendments included: (i) amendments to the forms for announcing the annual and preliminary financial results of insurance companies in accordance with IFRS 17 Insurance Contracts; and (ii) the addition of forms for announcing a capital increase with suspension of priority rights and a form for announcing the impact of emergency events on the company's business. The Announcement Instructions outline the main elements that should be available in all companies’ announcements on the website of the Saudi Stock Exchange (Tadawul), including instructions announcements relating to material developments and financial results.

Implementing Regulations (issued pursuant to Administrative Decision No. 1516/1445) relating to the Personal Data Protection Law (Royal Decree No. M/19, dated 09/02/1443H, amended pursuant to Royal Decree No. M/148, dated 05/09/1444H) came into force in October 2023. Businesses have a grace period to ensure compliance. The Implementing Regulations provide clarification as to consents to data processing, direct marketing, obligations of data controllers to ensure data security and privacy and data breach notifications.

Saudi Arabia’s economy has demonstrated its resilience over the course of 2022 and into 2023. In the midst of global economic pressures, geopolitical instability and the wake of the Covid-19 pandemic, Saudi Arabia emerged as the fastest growing G20 economy in 2022. 

Our Guide to Investing in Saudi Arabia brings you the latest economic trends, key programmes, and the legal framework relevant to structuring investments in the Kingdom. We outline the key themes investors need to know and how we can support you with our Middle East cross-practice and cross-jurisdictional team’s deep knowledge of the legal regime and sensitive understanding of customs and culture in the Kingdom’s business practices. 

You can access the Guide to Investing Saudi Arabia 2023 on its dedicated page on Linklaters.com. For any questions relating to the content of this report or if you wish to discuss in more detail any developments in the Kingdom, please reach out to a member of the team.

Environmental, social and governance (“ESG”) reporting will be mandatory for companies listed on the Bahrain Bourse from financial years commencing in 2024. ESG reporting in line with the Bahrain Bourse (BHB) Environmental Social and Governance reporting guidelines was previously voluntary. 

The Central Bank of Bahrain (CBB) will also require listed companies and financial firms including category 1 and 2 investment firms to comply with ESG reporting requirements set out in a new module, with effect from 2024.

According to an announcement by the Government of Kuwait, it will introduce a Business Profit Tax Law which would provide for a 15 per cent. tax on the profits of corporate entities, partnerships and businesses which have been incorporated or carry on business in Kuwait. Implementation is expected to be phased in from 1 January 2025

Under the current regime, in practice, corporate tax is only imposed on income earnt by foreign (non-GCC) companies.