Free zones: UAE case law

Partners in a bankrupt free-zone company are not traders and cannot be declared bankrupt with it

Under Articles 4(2) and 142 of the Bankruptcy Law (Federal Decree-Law No. 9 of 2016), bankruptcy applies only to traders in the legal sense, persons who carry on commercial business in their own name as a profession, and to partners who are jointly and…

Between LLC partners, a sham shareholding must be proved in writing, and profits are due only once distributed

Between partners, none may prove anything contradicting or going beyond the memorandum of association except in writing, so a partner cannot prove without written evidence that another partner's recorded holding is sham; this rule is of public policy and…

A 'pension' paid with salary during employment cannot replace a free-zone employee's end-of-service gratuity

Under Article 51 of the Labour Relations Law (Federal Decree-Law No. 33 of 2021), a foreign full-time worker with at least one year of continuous service is entitled to an end-of-service gratuity when his service ends. Rights that arise only when the…

An owner who signs facility terms for his free-zone company is not a guarantor unless he expressly guarantees its debts

A limited liability company formed in a Dubai free zone has, from its formation and registration, a legal personality and assets separate from those of its partners, who are liable for its debts only up to their shares. A person who signs a contract as the…

After Reem Island joined ADGM, a claim by a Reem Island company belongs to the ADGM Courts

New laws do not apply retroactively, but rules of public order take immediate effect on existing situations, and rules on jurisdiction ratione materiae are mandatory and of public order, so they apply at once to disputes not yet finally decided, even if…

Abu Dhabi courts lack jurisdiction over a claim to which an ADGM-registered company is a party

Jurisdiction ratione materiae is a matter of public order that the court must raise of its own motion. The ADGM Courts are a judicial authority separate from the Abu Dhabi Judicial Department, and under Article 13(7)(a) of Abu Dhabi Law No. 4 of 2013, as…

A written clause referring disputes to the DIFC Courts excludes the Abu Dhabi courts

Under Article 5(2) of Dubai Law No. 12 of 2004, as amended by Law No. 16 of 2011, the DIFC Court of First Instance may hear any civil or commercial claim that the parties agree in writing, before or after the dispute, to bring before it, provided the…

UAE courts cannot annul a foreign-seated arbitral award unless the parties chose the UAE Arbitration Law

An international commercial arbitration held abroad is not subject to the UAE Arbitration Law unless the parties agreed to apply it (Article 2 of Federal Law No. 6 of 2018). The law of the seat governs the award, including whether it can be set aside.…

A bankruptcy judgment given on appeal without the Public Prosecution's intervention is void

A bankruptcy petition is a procedural action to establish a legal status, the bankruptcy of a trader-debtor. The Public Prosecution must intervene in bankruptcy proceedings, and a judgment given without its intervention is void as a matter of public order,…

A DIFC Courts clause does not oust RAK courts over a RAK free-zone company not registered in the DIFC

The DIFC Courts' jurisdiction depends on the conditions in the DIFC judicial authority law. A company that is not registered in the DIFC is not one of its bodies or establishments; if its management is in Ras Al Khaimah and it belongs to the RAK Free Zone,…

Anyone with a direct interest may ask the court to appoint a liquidator, but the interest must be proved

Any person with an interest, even one who is not a partner, may apply to the court to appoint a liquidator for a company in liquidation when the partners cannot do so. The applicant's interest must be established, legitimate, positive and direct; a claim…

UAE courts hear a free-zone employee's claim against a foreign employer where the contract was performed in RAK

UAE courts have jurisdiction over a claim against a foreign defendant with no domicile or residence in the UAE where the dispute concerns an obligation performed in the UAE, and any agreement to the contrary is void. An employment contract performed at the…

RAK Free Zone Authority staff rules fill gaps in its employment contracts, including probation

The Ras Al Khaimah Free Zone Authority may lay down the rules needed to run and organise the Free Zone, its companies and its staff. A person employed by the Authority stands in a regulatory relationship with it: the employment contract governs where it…

The RAK Free Zone arbitration scheme does not take away the courts' jurisdiction over free-zone disputes

Arbitration in UAE civil and commercial matters rests on the parties' free agreement, which defines its scope and removes the dispute from the courts. The Ras Al Khaimah decree authorising the Free Zone chairman to set up an arbitration system for…