Federal Supreme Court, Commercial Appeal No. 963 of 2023, judgment of 12 December 2023
Under Article 4(1)(b) of the Commercial Companies Law, companies wholly owned by the federal or a local government or their institutions, bodies or subsidiaries are excluded from the law, apart from registration, in matters for which their founding documents make special provision. A federal authority or institution, a company wholly owned by the federal government and its subsidiaries are federal government entities, so disputes to which they are party, as claimant or defendant, belong to the federal judiciary. Article 24(2) of the Civil Procedure Law gives the Abu Dhabi Federal Court of First Instance exclusive jurisdiction over all disputes to which ministries and federal entities are party.
A private joint stock company sued in the Abu Dhabi commercial court to dissolve and liquidate an LLC, and to appoint a judicial liquidator, after the LLC's losses exceeded its capital and it stopped trading. The LLC's other shareholders included a research and training centre wholly owned by a federal higher-education institution. The Abu Dhabi court declined jurisdiction because a federal entity was a party and referred the case to the Abu Dhabi Federal Court of First Instance. On 22 June 2023 that court also declined jurisdiction, reasoning that government companies carrying out development projects are private-law persons and not federal entities under Article 102 of the Constitution. The federal appeal court affirmed on 20 September 2023. The centre appealed. The Federal Supreme Court quoted Article 4 of Federal Decree-Law No. 32 of 2021, in force from 2 January 2022, excluding wholly government-owned companies from the law save for registration, and Article 24(2) of Federal Decree-Law No. 42 of 2022, in force from 2 January 2023. It restated its settled view that federal authorities, institutions and wholly federally owned companies and their subsidiaries are federal government entities whose disputes belong to the federal judiciary. The centre had been set up in 1996 as an independent unit of a federal institution that federal law constitutes as an independent body with legal personality and a budget annexed to the federal budget. The centre derived its legal status from its nature, founding law and statutes rather than from the Companies Law, was not a private-law person, and its funds, being devoted to public benefit, were public funds. The Court also referred to the federal public debt law and the Cabinet's governance guide for federal boards. The courts below had therefore been wrong to decline jurisdiction. The judgment was quashed, and the Court proceeded to decide the case itself as ready for judgment.
Joint ventures with federal government entities are common. This judgment confirms that once a wholly federally owned entity is a party, even to an action to dissolve and liquidate a jointly owned LLC, the dispute belongs to the federal courts, and specifically to the Abu Dhabi Federal Court of First Instance under Article 24(2). The commercial character of the venture does not change that.
| Article 4(1)(b) of Federal Decree-Law No. 32 of 2021 (Commercial Companies Law) — text of article 4 |
| Article 24(2) of Federal Decree-Law No. 42 of 2022 (Civil Procedure Law) — text of article 24 |
| Article 102 of the Constitution of the United Arab Emirates |
| Article 1 of Federal Decree-Law No. 9 of 2018 on Public Debt, and Cabinet Resolution No. 11-2 of 2020 on the governance guide for boards in the federal government |
“الهيئة أو المؤسسة الاتحادية أو الشركة المملوكة بالكامل للحكومة الاتحادية والشركة التابعة لها تعتبر من قبيل الجهات الحكومية الاتحادية”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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