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July 2019

Viewing posts from July , 2019

Announcing ADG’s New Egypt Office

ADG is pleased to announce that it has extended its practice to Egypt with Ahmed Ragab AlKotby Law Firm.

With a full disputes team, headed up by our managing associate Ahmed Ragab AlKotby, we are delighted to now provide all our clients with specialist and expert Egyptian law advice and guidance directly from Alexandria, Egypt. The Firm in Egypt will work seamlessly with our headquarters in Dubai and our representative London office, ensuring that businesses and individuals receive responsive, bespoke and expert advice in and across multi jurisdictions.

We have always considered Egypt to be a major partner to the UAE. We believe the decision to extend our practice to Egypt is a great step towards our goal to consistently provide world class international legal advice from a UAE firm” commented Co-Managing Partner Mohammed Al Dahbashi.

If you have an Egyptian law matter and wish to speak with Ahmed in detail about how ADG can help, he will be delighted to hear from you. Please email him –

UPDATE – Snapshot Of Changes Under New DIFC Employment Law

Snapshot of changes under the New DIFC Employment Law

Written by Josh Kemp and Dennis Varghese of Al Dahbashi Gray

Background

On 12 June 2009, the Dubai International Financial Centre (“DIFC”) enacted DIFC Law No.2 of 2019 (the “New Law”) which repeals and replaces the existing DIFC Law No.4 of 2005 (the “Old Law”).

The New Law comes into effect on 28 August 2019.

In announcing the New Law, His Excellency Essa Kazim (Governor of DIFC) said:

“The DIFC Employment Law enhancements are integral to creating an attractive environment for the almost 24,000-strong workforce based in the DIFC to thrive while protecting and balancing the interests of both employers and employees.”

This update looks at the most significant changes coming into effect, to update employers and employees on their rights and obligations, and to enable employers to ensure that their employment contracts, policies and business practices are ready for commencement of the new regime.

Positives for Employees

  1. Paternity/Maternity Leave

Old Law: No provision for paternity leave.

New Law:

  • Male employees who have been employed for over twelve (12) months will be entitled to five (5) working days paid paternity leave, provided the conditions are satisfied.
  • The conditions are that the employee has provided written notice to his employer eight (8) weeks before the expected week of childbirth or date of adoption (only if the adopted child is less than five (5) years old).

The New Law also expands the rights of female employees returning from maternity leave, for example, by entitling them to nursing breaks if they work for more than six (6) hours a day.

  1. End of Service Gratuity

Old Law: No entitlement to gratuity if terminated for cause.

New Law:

  • Increases the protection given to employees by obligating employers to make a gratuity payment, even if the employment is terminated for cause.
  • Where an employee is terminated before completing twelve (12) months, the gratuity payment will be calculated on a pro-rata basis.
  • Employees may also opt to receive pension contributions as an alternative to the gratuity, provided the pension contributions are not less than the expected gratuity payment.

The changes to gratuity entitlements are perhaps the most controversial changes under the New Law, as the new provision drifts away from the stance taken by the UAE Labour Law, under which employers are not required to make gratuity payments where termination is subject to article 120 of the UAE Federal Labour Law (including “for cause”). However, the lifespan of “end of service” gratuity payments may be short-lived due to the proposed migration of the gratuity regime to a cash accrual regime in 2020.

  1. Part-time Employees

The Old Law: Did not recognise the concept of part-time and short-term employees.

The New Law:

  • The New Law formally recognises part-time employees as those who work less than eight (8) hours per day or less than five (5) days per week (or if the terms of the employment do not constitute full-time employment), with specific statutory entitlements to vacation leave, sick leave and maternity/paternity leave on a pro-rated basis.
  1. Discrimination

Old Law: Protected characteristics of discrimination under sex, marital status, religion, race, nationality and mental and/or physical disability. It did not provide any specific statutory remedy for a contravention.

New Law:

  • Widens the scope of the previous anti-discrimination provisions to include age, pregnancy and maternity.
  • Provides remedies in response to a positive finding of discrimination, by giving DIFC court the power to

i. make a declaration as to the rights of the complainant and respondent;

ii. make a recommendation (which, if not complied with, will lead to increase in compensation), and

iii. order the employer to pay compensation (which may include for injured feelings) capped at one (1) year’s wages (or two year’s wages for a repeat offence for the same employee) (Article 61).

  • Introduces protection for victimisation of employees in relation to claims for breach of the anti-discrimination provisions, which is very largely replicated from s.27 of the Equality Act 2010.

The most notable introduction is arguably the statutory right to compensation for discriminatory conduct. Overall, the changes bring the DIFC into closer alignment with international standards. Case law under the UK Equality Act will continue to be persuasive, but there are limits to the extent of its application, as UK Employment law has greatly been influenced by EU law, which has no legal effect in the DIFC.

  1. Penalties

Old Law: Employers are obligated to pay all wages and other amounts owing to an employee within fourteen (14) days of the employee’s termination date. Failure to make the payment within 14 days requires the employer to pay the employee a penalty equivalent to the employee’s daily wage for each day the entitlements remain unpaid.

New Law:

  • Retains the obligation to pay wages to an employee within 14 days.
  • Introduces a new system for penalty payments:

i. no penalty applies if the outstanding payment after 14 days is less than one week’s wages;

ii. the penalty will be capped at six month’s wages;

iii. no penalty accrues during the time a dispute is pending before the Court; and

iv. the Court may waive the penalty where the employee’s unreasonable conduct is the material cause of the failure to receive the amount due

The new regime strikes a greater balance of rights between employer and employee. The former provisions were generally regarded as draconian due to the potentially unlimited duration of the penalty and the fact that any penalty would continue to accrue during the course of litigation.

  1. Contracting-out

Old Law: Any waiver by an employee of any of the statutory employment rights was void, unless the Old Law specifically permitted it.

New Law: An Employer and Employee may now enter into a written agreement to terminate the Employee’s employment or to resolve a dispute, in which the employee agrees to waive certain entitlements, provided the employee (a) warrants that he/she had an opportunity to obtain independent legal advice; or (b) the parties took part in court-ordered mediation prior to the agreement.

Positive Update for Employers

  1. Sick Leave

Old Law: Employees are entitled to sixty (60) days of paid sick leave in an aggregate twelve (12) month period.

New Law:

  • Retains sick leave at sixty (60) days.
  • However, changes have been introduced to amend the calculation of paid sick leave:

i. first ten (10) working days of sick leave: full pay;

ii. next twenty (20) working days of sick leave: half-pay; and

iii. last thirty (30) working days of sick leave: unpaid (Article 35).

The changes quite significantly favour the employer when compared to the both the Old Law and the normal application of the UAE Labour Law, which requires employers to make full payments for the first fifteen (15) days, and half-pay for the next thirty (30) days.  Nonetheless, at a global level, the minimum rights under the New Law remain favourable to the employee – for example, when compared with the statutory minimums in the US (in which not all states provided for any paid sick leave at all) and the UK.

  1. Limitation Period

Old Law: Does not specify a limitation period to bring a claim against an employer.

New Law:

  • Introduces a six (6) month limitation period effective from the employee’s termination date.
  • In cases of discrimination, the claim must be brought six (6) months from the date of the alleged discriminatory act. However, the court has the power to disapply the limitation period if “there are circumstances which justify” or “such other period which the court considers reasonable” (Article 61(1)).
  1. Vicarious Liability

Old Law: Employers are vicariously liable for an act of an employee committed in the course of employment unless it is proven that the employer took reasonable steps to prevent it.

New Law:

  • While there are substantial wording changes, the substance merely reflects the English common law position as developed by recently decided cases. In relation to discrimination or victimisation, the changes align with the statutory defence of an employer in the UK Equality Act (ie where the employer took all reasonable steps to prevent the discriminatory conduct).
  • The changes are that an employer will be held vicariously liable:

i. for claims relating to loss, damages or compensation arising from an employee’s conduct, if it is shown that the conduct is sufficiently connected with the employee’s employment and it is “fair and just” to hold the employer liable; and

ii. for claims relating to discrimination or victimisation, if it is shown that the employer did not take adequate steps to prevent the employee from carrying out the conduct.

Other key changes:

  • “Opting in”- the Old Law was restricted to employees that were either based in the DIFC or were operating within or from the DIFC. Employers and employees outside of the DIFC can now contractually “opt-in” to the New Law.
  • “Minimum recruitment age” – the New Law has amended the minimum recruitment age from 15 years to 16 years of age.
  • Secondments – the New Law Recognises the concept of employee secondments as employees working temporarily within the DIFC for no longer than 12 months or such period approved by the DIFC.
  • Unpaid Special Leave – the New Law reduces the allotment of unpaid Special Leaves to a Muslim employee from thirty (30) days to twenty-one (21) days. Special Leave is only applicable if the employee has completed at least one (1) year of continuous employment.
  • Probation – The New Law formally recognises the concept of probation periods (not specifically recognised under the Old Law) of up to six months, provided they are included in an Employee’s Employment Contract.
  • Short-term employees – the New Law recognises the concept of short-term employees as those whose period of employment does not exceed an aggregate of thirty (30) days over a twelve (12) month period. Article 17(5) provides several provisions in the New Law, which do not apply to short-term employees, including sick-leave and end-of-service gratuity.
  • Paid time off – the New Law removes an employee’s right for paid time off to look for alternative employment during their notice period.
  • Carrying forward leave – employees will only be permitted to carry over five (5) days of accrued leave (not 20 days as per the Old Law) to the following year.

Shifting the balance towards the employee?

While the New Law does purport to strike a balance between the rights of employers and employees in, arguably it is employees that stand to benefit most from the New Law, as a result of more family-friendly provisions surrounding leave, the strengthening of anti-discrimination provisions, the expansion of gratuity rights to employees terminated for cause, and the prescription of fines for general contraventions of the Law by employers.

UPDATE – FDI in UAE

Update on Federal Decree No. 19 of 2018 (The “New Investment Law”)

By Serena Jackson (with Karim Salem) – Al Dahbashi Gray

The UAE recently announced a significant increase in the types of business where 100% foreign ownership is permitted. In future, the types of business will be determined by a newly formed Foreign Direct Investment Committee, chaired by His Highness Sheikh Mohammed bin Rashid, Ruler of Dubai and Prime Minister of the UAE.

In the recent past, most sectors required whole or majority ownerships for “onshore” companies, with only free zone companies and certain professional partnerships able to be entirely foreign-owned.  The new announcement allows 100% foreign ownership in companies across 13 different sectors, including construction, manufacturing, agriculture, renewable energy and entertainment. While there are still restricted sectors, notably in oil production, banking and insurance, these are becoming the exception rather than the rule.

Allowing for FDI in main on-shore businesses in the UAE, this decision could be a game-changer for the UAE economy.

Background

While the UAE operates and recognizes free zones where foreign investors can own up to 100% of their company, the same was not true outside the free zones, proving a challenge for companies entering the UAE looking to attract clientele and business on a national scale.

Looking to increase its GDP and, at the very least, maintain its position as one of the largest receivers[1] of foreign direct investment in the Middle East and North Africa (MENA) region, in late 2018 the UAE issued a decree that sought to lighten limitations on foreign ownership of UAE based and registered companies. The resultant Foreign Direct Investment Law (“New Investment Law” No. 19 of 2018) provided a framework for the Cabinet of the UAE to permit foreign shareholders to own up to 100% of companies in specifically designated sectors.

The New Investment Law therefore initiated a move in the right direction with regards to opening business operations and opportunities for non-nationals. The New Investment Law sought to redefine the UAE’s investment landscape and combat the development of a stagnant economy. It appeared to go hand in hand with other reforms such as the allowance of long-term residency options for investors and professionals in the country.

Limitations of the New Investment Law

The New Investment Law permitted foreign investment in sectors of the economy if those sectors do not appear in a ‘negative list’ and specific sectors on the ‘positive list’ would be given the privilege of operating under the new law.

Whilst the 2018 decree listed a number of sectors in the ‘negative list’ including oil production, banking and insurance, no such sectors were listed in the ‘positive list’. FDI was therefore not immediately permitted pursuant to the New Investment Law.

UAE Cabinet Meeting of 2 July 2019

The UAE Cabinet meeting of 2 July 2019 formed the FDI Committee, which has the right to create, alter, remove or add any economic sector to the ‘positive’ and ‘negative’ lists.

It announced that 100% foreign ownership of businesses in 122 economic activities across 13 sectors were approved to appear on the ‘positive list’. Sectors such as agriculture, renewable energy, construction, manufacturing and entertainment are now on the ‘positive list’. [2]

Looking To The Future – FDI In The UAE

As per the new legislation, these business ventures with FDI must integrate smoothly with the strategic plans of the UAE and look to increase innovation and employment opportunities for UAE nationals. The government is also looking to ensure there is a positive impact on the environment and a tactical use of technology and technological developments. Overall, the ‘positive list’ is determined at the discretion of the FDI Committee and looks to streamline success between foreign and local investors.

While this recent approval for inclusion of activities on the ‘positive list’ was made by a nation-wide cabinet, each local government (throughout the seven Emirates) reserves the right to decide on the appropriate percentage of ownership in each respective field. In some cases, and some Emirates, certain activities may require an Emirati shareholder, as foreign ownership may have increased from the original 49% possible for a foreign investor but may not reach 100%[3].

Despite these limitations, this New Investment Law allows for foreign businesses and investors to increase their scope of possibilities within the now broader economy of the UAE. However, it is also written to ensure that local interests are protected and continue to be fostered and developed. Future ramifications of this legislation appear to be mostly positive. The UAE is hopeful that this will not only ease the possibility of doing business but that it will encourage businesses to make the UAE their base and headquarters for operations.

 

[1] “Foreign Direct Investment, Net Inflows (BoP, Current US$).” Data. Accessed July 11, 2019. https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=ZQ&most_recent_value_desc=true.

[2] Mohammed, HH Sheikh. “In a Cabinet Meeting…” Twitter. July 02, 2019. Accessed July 11, 2019. https://twitter.com/HHShkMohd/status/1146036928892080128.

[3] Planning to Set up a Business – The Official Portal of the UAE Government. Accessed July 11, 2019. https://www.government.ae/en/information-and-services/business/planning-to-set-up-a-business.

ADG’s Africa Practice

Did you know that a significant amount of our work at ADG concerns Africa? Many of our lawyers and staff are African, and most of those that are not have extensive experience in the continent. We advise and assist governments and investors, individuals and corporates, major Asian companies, start-up western investors and much in between. We concentrate on bringing deals together, resolving disputes and getting the job done.

Recognising that most significant conversations and decisions depend upon personal relationships, and a first-hand understanding of the needs and national interests of each African country, our team spend a great deal of time travelling. It helps that Dubai (our headquarters) is an African hub, is only four hours from many prominent African cities, and only about eight hours to some of the more distant major cities, such as Johannesburg, Abuja and Accra.

 

This diagram shows just a selection of the countries we visit and/or have a connection with. If you want to talk, or learn more, about Africa, give us call. We’ve also put together a brochure about Africa which challenges many preconceptions. We think it makes for a fascinating read – let us know if you’d like an e-copy.

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