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New Commercial Courts In Abu Dhabi

Al Dahbashi Gray has recently obtained a judgment issued by the newly established Abu Dhabi Commercial Court (Commercial Court). The Commercial Court was formed by Decision No.28/2019 on 4 September 2019 and comprises of minor, major and appeal chambers. The Commercial Court is completely independent and exclusive from the Abu Dhabi Court of First Instance.

It should be noted at the outset that prior to the establishment of the Commercial Court, all cases in Abu Dhabi were registered as ‘commercial’ without much attention being paid towards the commercial or civil nature of the cases. For simplification purposes, commercial cases relate to disputes between businesses while civil cases involve individuals.

Al Dahbashi Gray represented the Defendant and obtained a favourable judgment on its behalf. The Court dismissed the case for lack of jurisdiction and ordered the case to be transferred to the relevant Abu Dhabi First Instance Court due to the civil nature of the case. This judgment confirms that the Commercial Court has only jurisdiction over commercial disputes.

The Decision No 28/2019 further confirms that the Commercial Court shall have jurisdiction over disputes, motions, and cases arising in connection with the application of the following laws (even if the transaction is civil for one party and commercial for the other):
– Commercial Transactions law
– Commercial Companies Law
– Commercial Agencies Law
– Emirates Securities & Commodities Authority and Market
– Copyright Law
– Industrial Property Protection Law for Patents and Industrial Designs
– Transactions and Electronic Commerce Law
– Consumer Protection Law
– Competition Regulation Law
– Bankruptcy Law
– Central Bank Law
– Foreign Investment Law
– Maritime Trade Law
– Air Transport Law and Rules

Furthermore, the scope of Commercial Court’s jurisdiction will cover enforcement of foreign judgment or arbitral awards provided such judgments or awards are of commercial nature.

Accordingly, it is now imperative for law firms and/or litigants to ensure that they register their cases before the appropriate court systems. Registering a civil case with the Commercial Court would most likely be dismissed resulting in needless time and costs spend on litigation.

If you need any help in understanding the changes and the potential impact of the recent amendments, please contact us on info@adglegal.com.

COVID-19 Employment Law Update: Common Questions Answered for the UAE

We have been receiving a flood of employment-related enquiries since the outbreak of COVID-19, and the situation is changing almost on a daily basis. We have set out below our answers to some of the most frequent questions we have been asked.

  1. What are the employer’s obligations with regards to the safety of their employees?
  • Employers operating under the UAE Labour Law, DIFC and ADGM laws must provide their employees with ‘adequate means of protection’ and must ensure the health, safety and welfare of their employees.
  • To control the spread of the virus, we recommend employers to carry out risk assessments and take precautionary measures, such as holding educational seminars and actively encouraging their employees to work from home.
  • We also recommend employers to circulate up-to-date information on best hygiene practice and provide any equipment to facilitate this, such as hand sanitizers and facemasks.

 

  1. Can employees be terminated due to COVID-19?
  • In our experience, UAE Courts will only consider termination to be valid if a) the employee is guilty of one of the specified violations listed in Article 120 (which, amongst others, includes violations such as disobeying safety instructions issued by an employer, defaulting on the terms of the employment contract, and revealing any confidential information to competitors) of the UAE Labour Law or b) if the employer has documentary evidence to prove the employee is a poor performer.
  • Therefore, termination merely due to COVID-19 itself will be considered arbitrary (and therefore unlawful) under Article 122 of the UAE Labour law, as it does not relate to the employee’s work performance. However, since many businesses are currently facing financial difficulties, it is unclear whether courts will consider termination due to economic or financial downturn to be a valid reason for termination. We will have to wait and see how the courts deliberate on this.
  • In addition, on 26 March, the UAE issued a resolution (Ministerial Decision No. 279/2020 (the Resolution)) for all private sector employers to register their employees on the Virtual Labour Market (VLM) which enables jobseekers to search for jobs in the UAE. More information on VLM can be found here.
  • Furthermore, employers will need to settle their employee’s dues as outlined in the relevant law and employment contract before finalising their termination.
  • Comparably, DIFC and ADGM laws allow employers to terminate employment contracts without cause if they provide sufficient notice. The notice period may vary depending on the terms of the employment contract.

 

  1. Does an employee have the right to work from home?
  • The UAE’s recent decisions to enforce strict measures to contain the spread of COVID-19 on a 24/7 basis means that only employees that work in certain sectors will be permitted to attend the workplace (Exempted Sectors). Some of the vital Exempted Sectors are healthcare, telecommunications, media and banking & finance (a full list of the Exempted Sectors can be found here).
  • Unless an employee works in one of the Exempted Sectors, they must work from home.
  • Employers (that fall under the list of Exempted Sectors) can decide which of their employees attend the workplace. However, there are guidelines for employees to prioritise working from home (e.g. pregnant women, older employees, and employees with chronic diseases).

 

  1. Can an employee be forced to take their paid annual leave?
  • Yes, provided employees have enough leave balance available.
  • UAE Labour Law, DIFC and ADGM laws employers have the right to compel employees to take annual leave and determine the date of its commencement.
  • DIFC and ADGM require employers to give 7-days’ notice before doing so. This is not a requirement under the UAE Labour Law.

 

  1. What happens if an employee is infected or becomes ill?
  • As per the UAE Labour Law, DIFC and ADGM laws, COVID-19 will be treated in the same manner as any other sickness, in terms of payment.
  • The Labour Law stipulates that an employee is entitled to 90 calendar days of sick leave. The first 15 days are payable at full pay, the next 30 at half pay and the remaining 45 days are unpaid.
  • DIFC and ADGM laws provide employees with a maximum of 60 business days of sick leave. The first 10 days are payable in full, the next 20 days half pay and the remaining days as unpaid.
  • While these are minimum requirements under each of the jurisdictions, an employer may provide more generous entitlements.

 

  1. Can employers compel employees to take unpaid leave?
  • The UAE’s recently issued Resolution (279/2020) gives employers effected by COVID-19 the option to take the following gradual steps as precautionary measures, in their respective order:
  1. Working remotely
  2. Paid annual leave
  3. Unpaid leave
  4. Temporary salary reduction
  5. Permanent salary reduction (approval required from the Ministry in accordance with the normal procedures)
  • As discussed in Q3, employees that do not fall under the list of Exempted Sectors are required to work from home.
  • Furthermore, the Resolution applies only to non-UAE national employees and is applicable only during the duration for which the precautionary measures are in place in the UAE. It is also applicable only to onshore companies who are subject to the MOHRE regulations.
  • The newly issued Resolution does not provide any guidelines for the duration of unpaid leave. Therefore, our advice to employers is to try to minimise the impact on employees as much as possible. We recommend employers to place their employees on unpaid leave, only if they are actually facing losses and not just decrease in profits.

 

  1. Can an employer make salary reductions?
  • The UAE’s recent Resolution affirms that employers who wish to temporarily reduce salaries during the period of precautionary measures may draft a “temporary supplement” to the employee’s employment contract. More information on this can be accessed here.
  • If the employer wishes to introduce permanent salary reductions, it must obtain permission from the Ministry. This step must only be taken if all the other four steps (as mentioned in Q6) have been exhausted and in accordance with the normal rules of changing labour contracts.
  • DIFC and ADGM employers need to consider that non-payment of salary may result in the penalties specified under respective employment laws, which may be severe.

Final Comments

Employers need to be careful to strike the correct balance between protecting its workforce and business continuity, while simultaneously preventing undue panic.

The key takeaways are:

  1. There should be regular and consistent communication in place between employers and employees and employers should ensure employees understand the rules as they are evolving.
  2. The employer must continue to undertake risk assessments on an ongoing basis to both minimise the spread of the virus and ensure the smooth functioning of the business.
  3. Employees should review their employment contracts to be mindful of its provisions in the event they are terminated or placed on sick/annual leaves.
  4. Employers need to be aware of the restrictions on their ability to reduce salaries, force leave and to terminate employees.

To assist clients to navigate this crisis, we have set up a Special Purpose Hub enabling clients and potential clients to contact a member of the team to obtain preliminary or in-depth advice. Enquiries can be sent to covidqa@adglegal.com

MOHRE’s Decision in Response to COVID-19

Since COVID-19 precautionary measures were implemented, we have been flooded by employment inquiries from both employees and employers who have been affected.

We have always tried to balance our advice pragmatically and know that it is important to allow businesses to continue running and vital to ensure employees’ wellbeing and survival remains a top priority. Our advice varies based on the size of the employer, the current circumstances, and the tolerance level of both the business and its human capital.

On 26 March 2020, the Ministry of Human Resources and Emiratization came up with the Ministerial Decision no. 279/2020 which addresses a number of these concerns. This decision included two main provisions:

A. Applicable measures employers may take in response to the precautionary measures

  1. The Ministry advised employers to apply the following measures on a step by step basis:
  2. Working from home methodology;
  3. Granting paid leave to employees;
  4. Granting unpaid leave to employees;
  5. A temporary decrease in salaries, with a requirement to enter into an addendum in the form provided by the Ministry which shall expire by the end of its period or by the end of the precautionary measures, and which should be in two copies: one to the employer and one to the employee, available for the Ministry to check whenever required;
  6. A permanent decrease in salaries, which should follow the normal procedures set out by the Ministry

While there is no guideline on the time period required to move from one step to another, we advise clients to apply the reasonability test. This means that less severe measures should be applied when there is an opportunity to do so. Further, as these measures decrease employees’ benefits, they should be taken only in response to actual losses incurred or expected to be incurred by the employer. A decrease in profit would not constitute a reason for decreasing the benefits.

B. Virtual Labour Market (VLM)

Separately, the Ministry advised employers with excess employees to register them on the VLM to show their availability to other potential employers. The current employer shall remain responsible for all allowances (except salaries) until the employee leaves the country or joins another employer.

For those employers who wish to recruit new employees using the current pool available on the VLM, they may apply for new permits, temporary permits, and part-time permits as applicable.

During this tough time, everyone must co-operate in the best interests of our society. A number of our clients have already started planning initiatives to employ idle talents during this period to fulfil the increased need for specific areas of work and to satisfy corporate social responsibility towards our communities.

If you like more information about this decision, the measures applicable, or assistance on how to plan your measures, please contact us at covidqa@adglegal.com.

Effects of COVID-19: Cross-Border Contracts and ADG’s Dedicated Advice Hub

The following article considers the treatment of force majeure and other forms of relief under contracts in numerous key jurisdictions around the world. While it is to be hoped that these unique circumstances lead contracting parties to find workarounds such that neither benefits or suffers more than the other, there will inevitably be occasions when a party relies upon its legal rights – regardless of the social considerations in play.

As the coronavirus outbreak continues to wreak havoc on markets and industries, businesses are now confronting significant and unique challenges. Successful navigation of these challenges will require thoughtful and comprehensive planning for the conduct of all activities by business and institutions, from the administration of justice, the exercise of individual freedoms, the performance of existing contracts, to the continuation of business operations.

Al Dahbashi Gray is providing in-depth advice to clients on the adverse effects on their businesses due to the occurrence of COVID-19. Through our core team of lawyers and our associated firms, we are well-placed to cover – directly or indirectly – many jurisdictions, including UAE and GCC, Egypt, UK, US, Australian, Russian, French, Italian, most African, and many others.

ADG Online Hub

To assist clients to navigate this crisis, ADG has set up a Special Purpose Hub enabling clients and potential clients to contact a member of the team to obtain preliminary or in-depth advice. The Hub can be accessed by directing enquiries to the following email address dedicated to cases of business disruption due to COVID-19: covidqa@adglegal.com.

The Hub is particularly aimed at those industries which are facing delayed or aborted corporate transactions, disrupted supply chains, sharp decreases in corporate earnings, concerns over the commercial viability of contracts, major event cancellations or a fall in customer numbers because of the pandemic.

Guidance on Navigating the Effects of COVID-19 under Cross-Border Contracts

Many supply, construction, privatization, infrastructure, aviation, transportation and oil and gas agreements are already significantly affected by the occurrence of a catastrophic event which is unprecedented.

Energy and natural resources contracts are generally characterised by lengthy durations and often have international components, as with commodity contracts (including iron ore, coal and copper), LNG contracts, shipbuilding contracts, supply contracts for textiles, foodstuffs and mechanical equipment, contracts for electrical equipment and electronic components and medical equipment manufacturing contracts.

Due to the long-term nature of these agreements, they are highly vulnerable to changes of circumstances within political, economic, legal and even technical spheres. In such cases, comprehensive contracts have proved to be the best shield against the intervention of harsh, sudden and unforeseen contractual distortions and imbalances. Hence, hardship clauses have been developed and inserted in many types of contracts, including power purchase agreements (PPAs), SWAP agreements, concessions, public-private partnerships (PPPs) and sale agreements.

The disruption caused by material shortages, the impossibility for specialized workforces to reach affected countries, lack of coordination on-site and lack of financing granted by banks, will inevitably mean that contracts need to be reviewed and possibly amended to deal with these circumstances, whether or not a force majeure has been triggered.

If your agreement does not provide for renegotiation through a hardship clause, it may be possible to make a case for impossibility of performance or to rely on a force majeure clause (discussed below).

Governing Law and Force Majeure

Most of the contracts referred to above are indeed cross-border contracts, with parties located in different jurisdictions. The choice of governing law for those contracts is highly material, and particularly so for parties established in jurisdictions (such as many in Africa) that lack legislation or an advanced body of case law for dealing with events that may trigger force majeure, hardship and other similar doctrines.

The difference in approaches to these questions can cause great confusion for contracting parties who are called upon to perform certain obligations in jurisdictions that have been more severely affected by the pandemic (with different government responses) and whose legal systems may deal with the consequences more or less favourably to them than the governing law under the contract. This brings significant risk if parties take steps under a particular contract without consideration to the likely position under associated contracts.

Depending on the governing law nominated, the treatment of such a pandemic (force majeure or otherwise) can be radically different. For example:

The UAE and GCC Countries

If there is the permanent impossibility of performance in a bilateral contract, this will lead to automatic cancellation under Article 273. According to the jurisprudence of the Court of Cassation, the relevant event must have been unforeseeable.

  • If there is the permanent impossibility of performance in a bilateral contract, this will lead to automatic cancellation under Article 273. According to the jurisprudence of the Court of Cassation, the relevant event must have been unforeseeable;
  • For partial impossibility, the relevant part is severed, and the affected party may elect to terminate;
  • Where performance is not rendered impossible but seriously more onerous – or if the impossibility is only temporary – the court or tribunal may adjust the obligations of the parties to relieve hardship. However, establishing entitlement to additional costs may be difficult to navigate due to the general principle under the code that the other party will not be responsible for making good the other party’s loss if he played no part in it.

For those contracts governed by DIFC and ADGM law, the position will be similar to English law as discussed below.

Similarly, all GCC countries recognize the legal doctrine of force majeure in some form, when an obligation under a contract is rendered impossible to perform due to an external event. In certain circumstances, even where an event is not a force majeure event, the laws of most GCC countries permit the court to reduce (but not necessarily fully excuse) a parties’ liability where the imposition of a contractual obligation would be onerous due to unforeseen circumstances.
Europe

France and Italy expressly have in their respective civil codes a well-defined concept and procedure for the declaration of force majeure. Germany, however, does not. Rather, force majeure must be construed by reference to other statutes and vast case law.

Common Law Countries, e.g. the UK and the US

In most common law countries, there is no recognised legal doctrine of force majeure and hardship; these are merely creatures of contract. It is therefore up to the parties to negotiate any force majeure provision, the definition of a force majeure event, the notice obligations, and other relevant provisions.

Neither the UK nor the US has any specific legislation dealing with force majeure and hardship. However, certain statutory provisions operate in a similar manner. For example, concerning contracts for the sale of goods, in certain circumstances concepts similar to the force majeure concept may be implied.

In contracts for the sale of goods between countries that are parties to the UN Convention on Contracts for the International Sale of Goods (CISG) (and if the CISG has not been excluded in the agreement), section 79 of the CISG provides a remedy similar to a force majeure clause. It provides that a party is not liable for a failure to perform any of its obligations if it proves that the failure was due to an impediment beyond its control and that it could not be reasonably expected to have taken the impediment into account at the time of the contracting. Similarly, contracts for the sale of goods under the Uniform Commercial Code (UCC) in the US are subject to section 2-615 of the UCC, which excuses performance under a contract if performance, as agreed, has been made impracticable by the occurrence of a contingency, the non-occurrence of which was a basic assumption upon which the contract was made.

Further, the common law doctrine of frustration may be relevant, although under English law is still very difficult to establish. It requires an unforeseen subsequent event outside the control of the parties, rendering it impossible to perform, or so radically different from that intended that it would be unfair to hold the parties to it. The fact that performance has been made more difficult or costly is not enough. Even if it can be established, frustration would rarely be commercially desirable because its effect is to bring all parties under the contract immediately to an end.

For this reason, many English law contracts (and those governed by similar systems) contain force majeure clauses. However, these are variable in quality and breadth and may be construed against the drafting party in “standard terms” cases.

Asia

Hong Kong
Following English law, Hong Kong law does not imply the concept of force majeure into commercial contracts. It is entirely up to the parties to negotiate whether or not there should be a force majeure clause in the contract, and if so, its scope and the circumstances in which it can be exercised.

People’s Republic of China
The PRC can, to a certain extent, be considered a civil law country. Under PRC General Provisions of the Civil Law (promulgated in March 2017), force majeure is generally recognized as an excuse for not performing civil obligations. Force majeure exists as a doctrine under Article 180 of the General Rules on the Civil Law and Articles 117 and 118 of the PRC Contract Law. The regime applies automatically to commercial contracts governed by PRC law where the contract contains no force majeure provisions.

If a contract does not include a force majeure provision, it will be implied. If a contract includes a force majeure provision, a party can rely on the force majeure provision or resort to the protection offered by the general law if the scope of the contractual remedy is considered to be limited. To be eligible for force majeure protection under PRC law, the affected party must demonstrate that the relevant situation is unforeseeable, unavoidable and cannot be overcome, and also that it is the cause of the affected party’s inability to perform its obligations.

However, under the Contract Law, force majeure does not apply: (1) where the contract is entered into after the force majeure event; (2) to non-performance of monetary payment obligations; or (3) if the force majeure event occurs after the affected party delays performance.

The China Council for the Promotion of International Trade has been issuing force majeure certificates to companies that claim they are unable to meet their contractual obligations to protect them from potential breach of contract claims by counterparties. These certificates would not automatically satisfy the “test” for force majeure for a contract governed by English, PRC or another law; these certificates would at best provide evidentiary support for the affected party’s force majeure claim, but the specific requirements of the force majeure provision must still be satisfied.

We understand that there is pressure on the China International Trade Commission to stop issuing force majeure certificates for companies as the Chinese Government is keen to revive the economy as soon as possible. State-owned enterprises have been instructed to resume operations and recall all employees back to work. While these orders may be resisted in some instances, it is widely thought that without governmental support, there will likely be fewer force majeure claims made by Chinese companies. Numerous force majeure claims involving a Chinese buyer or supplier have already been reported in the worldwide media and it seems likely that claims with a wider ambit will follow as the ripple effects of the outbreak spread globally.

Practical Steps for Contracting Parties

Despite the potentially different outcomes under the different governing laws, it is possible to devise a course of action that should be followed to not only react to but to pre-empt the different permutations as the situation continues to unfold.

We recommend that parties consider the following:

  • Carefully review your contract to determine whether the contract includes a force majeure provision and, consider:
    • The definition of a force majeure in that contract to determine whether events such as pandemic situations are included and, if not, whether the general language is sufficient to include COVID-19 and its consequences;
    • The nature of the triggering event and the effects necessary for it to be triggered;
    • The procedure for any renegotiation and the desired outcome;
    • The remedies available if renegotiation fails (these might include resorting to a judge or arbitrator, or termination of the contract);
    • The conditions that must be met to resort to termination.
  • Consider whether the contract provides any form of partial relief from obligations, even if force majeure cannot be invoked;
  • Consider those aspects of the relevant contract that you are not able to perform and satisfy yourself that the inability to perform is due to the consequences (direct or indirect) of COVID-19;
  • Review financing or other related agreements to determine whether there are cross-clauses and notice provisions that must be complied with concerning anticipated or actual force majeure or hardship claims;
  • Determine whether insurances, such as business interruption insurance or force majeure insurance, may cover any of the expected losses;
  • Consider whether you have taken steps to mitigate the effects, such as substitutions in supply;
  • Identify all notice provisions and review whether you have promptly given those notifications and are updating them as the effects evolve.

If in doubt on any of these matters, we suggest immediately taking legal advice. Questions can be submitted to covidqa@adglegal.com.

Further details of our expertise, countries of qualification and geographical coverage are available on our web site at www.adglegal.com.

Written by Roberto Cornetta, Josh Kemp and Shams Elkodama

Managing Cross Border Risk, a Collaboration with IR Global

We were delighted to be asked to contribute to an IR Global publication ‘Managing Cross Border Risk: A Jurisdictional Guide of How to Manage Risk in Multi-Nationals’, sharing our extensive corporate knowledge of the UAE jurisdiction. Associate Dina Assar drafted the section, which we share with you below. For the full report, visit the dedicated page on IR Global’s website here.

1. When representing a client with significant business activities in foreign jurisdictions, what are the key risk-related concerns that arise in a cross-border context and how can a parent company minimize such risk?

The UAE being one of the most active international business hubs in the region, we come across many multinational clients with diverse business portfolios that stretches across multiple regions and jurisdictions. When representing those clients, we are generally faced with problems related to the application and interpretation of the law, as well as jurisdictional and inherent cultural challenges. These may relate to public policy misinterpretation, judge’s understanding and / or expertise in relation to our clients’ line of business (being different to typical business in the country).

The challenges can be summarized as follows:

  1. Laws being vague with varying levels of ambiguity and room for interpretation;
  2. When there is clearly written law, the judicial or administrative authorities may opt to take what appears to be a contradictive approach. Some government agencies follow practices that are inconsistent with certain provisions of law or are subject to a different interpretation of such provisions;
  3. Local courts can still take jurisdiction over certain disputes presented to them, even though the parties may have contracted to submit the dispute to a jurisdiction outside the UAE;
  4. Culturally, people are reluctant to say “no” in Arabic cultures (making some tasks seem simple when explained but more challenging in practice).

Accordingly, we always advise our clients not to rely solely on written law, but rather to take an appropriately practical approach. This must consider local customs in terms of interpretation provisions. It is helpful to rely on judicial precedents in the UAE (even those not strictly binding, especially ones issued from the court of Cassation, as they are often followed by judges in the courts of First Instance and Appeal.

2. What degree of control should a parent company have over its overseas subsidiaries? How does the degree of control impact the risk exposure level and how can control issues be managed to minimize liabilities?

Parent companies based in jurisdictions outside the UAE are advised to keep tight control over their UAE subsidiaries to mitigate the different risks that may arise from operating in an environment that is legally and culturally different.

Such control would initially start from the inception of the subsidiary entity in the UAE – or the Middle East – where we advise clients on the ideal type of company formation, depending on their business activities and other economic factors. Appointment of management and delegation of authority is a critical part of the process.

After the company is formed, we advise and support our clients to maintain a strong corporate governance program for their UAE and Middle East entities. For example:

  1. Functional AGMs;
  2. Ensuring provisions of commercial companies law and tax law (if any) are adhered to, especially in terms of timelines, statutory disclosures and submissions to governmental authorities and regulators;
  3. Maintaining accurate financial records, as per the provisions of the commercial companies law and the subsequent financial laws of the UAE; and, most importantly,
  4. Oversight on management and control over their authorities.

3. What constitutes the right balance between risk and liability for a company and its overseas subsidiary? What examples can you give?

By having a subsidiary in a foreign jurisdiction, parent companies are automatically assuming certain risks and exposures inherent to such jurisdictions. We support our clients to reduce these risks, prioritizing the development of a risk mitigation plan which balances risk and liability and focuses on enhancing preventive measures.

A very common example in the UAE would be if a company took the Dubai International Financial Centre (“DIFC”) as a place to operate. This will – in most scenarios – automatically expose them to other means of common law principles which might negatively affect the style or direction of the client’s business. Nonetheless, for international clients, a place like the DIFC allows them to operate comfortably with common international laws and standards.

4. What are your 3-5 key considerations for multinationals operating in high-risk industries and jurisdictions?

  1. Make sure the jurisdiction is the right jurisdiction to operate in;
  2. Choose a reliable local partner;
  3. Take best measures when appointing management and delegate them precise authorities;
  4. Make sure to visit the jurisdiction to understand the culture and interact with people on the ground.

Roberto Cornetta and John Leopoldo Fiorilla Join the Team

We are pleased to announce that Al Dahbashi Gray will be joined in February by Roberto Cornetta, a senior Italian lawyer of over 30 years’ experience, as an Of Counsel Partner in our Dubai office and his long-time colleague John Leopoldo Fiorilla di Santa Croce, a senior US and Italian lawyer with vast corporate experience, as Of Counsel.

Roberto graduated in Law at Yale Law School and worked for six years in New York City. He then went on to become the founder and CEO of Norton Rose Italy, where he remained for 12 years in their European PF group. 8 years as CEO of Paul Hastings in Italy followed, where his focus was on large real estate, hospitality, finance and cross border M&A in Europe, India and China and Africa.  He also spent six months in Hong Kong and six months in Colombia for the Italian Electricity Company. Roberto has had several referrals from large US law firms and clients and has been appointed by Stanford University as the sole European member of their “Seeds for Africa” program in recognition of his experience in both professional and pro bono work.

John received a J.D. from the University of Pittsburgh School of Law, where he was Managing Editor of the University of Pittsburgh Law Review, and a Master of Laws in International Legal Studies from New York University School of Law. Before joining Al Dahbashi Gray, John practised in the New York and London offices of Sullivan & Cromwell, as well as with Brosio, Casati e Associati in Milan. In addition to his new role with Al Dahbashi Gray, John will still serve as Managing Partner of the Arabian Gulf Fund, a boutique private equity firm based in Nassau and New York City, and holds a number of other notable posts.

“The addition of Roberto and John to Al Dahbashi Gray is a great contribution to our goal of becoming a world-class local firm with a truly international service. Their considerable experience will be a boon to our clients and will expand the breadth of the Firm’s transactional practice.” – Co-Managing Partner Mohammed Al Dahbashi

“We believe that Roberto and Join will prove a great fit with our expansion into Africa and look forward to continuing our developments in the region with new energy and experience.” – Co-Managing Partner Peter Gray

New Employment Regulations Issued by ADGM

By Dennis Varghese

On 28 October 2019, the Abu Dhabi Global Market (“ADGM”) published its new employment regulations (“New Regulations”) which will come into effect on 1 January 2020. In this article, we examine the key changes and contrast them to the current employment provisions in operation in the ADGM (“2015 Regulations”).

The changes are aimed to strengthen ADGM’s employment framework in the interests of both employers and employees, in order to meet international best practices. The Dubai International Financial Centre (“DIFC”) took a similar step in August of 2019 when it also adopted an updated employment law. For more information on the new DIFC employment law, please click here.

ADGM’s New Regulations can be read in full here.

Summary of Key Changes

Overtime Payment

2015 Regulations: The Regulations stipulate that the maximum working week is 48 hours “unless the Employer has first obtained the Employee’s consent in writing”. There is no provision for overtime pay for hours worked in excess of 48 hours.

New Regulations:

  • Employees are now entitled to overtime compensation in respect of time worked in excess of 832 hours over a period of up to 4 months. Calculations are done on a pro-rata basis;
  • Overtime compensation can either be monetary or by time in lieu, as decided by the employer. Monetary overtime is the employee’s daily wage plus 25% of the hourly rate (or 50% of the hourly rate for overtime between 9.00 pm – 4.00 am);
  • Employees in positions where it is reasonably expected within that industry internationally that overtime time compensation is not paid (such as managers and supervisors), are exempted from overtime compensation.

Sick Leave/Pay and Repatriation Flight Tickets

2015 Regulations:

  1. An employee is entitled to 60 business days paid sick leave in any 12-month period;
  2. No provision with regard to repatriation flights.

New Regulations:

  1. The number of sick leave days remain at 60 business days. However, amendments have been implemented to reduce the sick pay to the following (the change matches the minimum requirement under DIFC employment law):
  • full pay for the first 10 business days;
  • half-pay for the next 20 business days; and
  • no pay for the remaining 30 business days.
  1. The New Regulations now require employers to provide, upon the termination of the employee, with a one-way repatriation flight ticket to the employee’s home country unless:
  • the employee obtains an alternative employment or visa sponsorship in the UAE within 30 days; and
  • the employee has been dismissed with cause.

Discrimination

2015 Regulations: Prohibited discrimination against an employee on the grounds of sex, marital status, race, nationality, religion and disability.

New Regulations: The New Law has widened the scope of the previous anti-discrimination provisions by including discrimination on the basis of ‘colour’.

Termination

2015 Regulations: Required the Employer to submit a notice to the employee prior to termination of employment in the following manner:

  • 7 days’ notice if the period of continuous employment is less than 3 months;
  • 30 days’ notice if the period of continuous employment is 3 months to 5 years’;
  • 90 days’ notice if the period of continuous employment is over 5 years’.

New Regulations: A written notice is now required to be submitted by the employer. Additionally, employers are no longer required to submit a 90 days’ notice in cases of over five years of employment; as such employer or employee need only give 30 days’ written notice. Hence, notice is now required in the following manner:

  • 7 days’ notice if the period of continuous employment is less than 3 months; and
  • 30 days’ notice if the period of continuous employment is more than 3 months.

Powers of ADGM Board

2015 Regulations: Stated that the ADGM Board may make rules setting out applicable fines.

New Regulations: Now expressly refers to powers of the ADGM Board to issue rules setting out fines. These rules have been issued alongside the New Regulations and will also come into force on 1 January 2020. A full copy of the rules can be viewed here.

Data Protection

2015 Regulations: Included comprehensive data protection provisions.

New Regulations: Data protection provisions set out in the 2015 Regulations have now been removed as ADGM does not have a stand-alone data protection law.

Youth Employment

2015 Regulations: Prohibits employers employing a youth below 15 years of age.

New Regulations:

  • New Regulations provide clarity on the employment of youth: employers can now hire youths between 15 and 18 years of age;
  • New Regulations also widen the scope of protection offered to youth employees, obligating employers to take all appropriate measures to ensure the conditions of employment are safe and reasonable.

Conclusion

Changes introduced by the New Regulations are not substantial in terms of the number of amendments but it is important that companies in the ADGM review their existing policies, procedures and employment contracts and make any necessary amendments to ensure the provisions in the New Regulations are complied with before 1 January 2020.

If you need any help in understanding the changes and the potential impact of the recent amendments, please contact us on info@adglegal.com.

New Decision Allows Some Cases to Stop at Prosecution

By Abdulrahman Junaid

The UAE is always striving to develop and improve its legal process, making it more efficient and less burdensome on its residents. On 1st October 2019, the Attorney General issued an amendment under Decree No. 119 of 2019 against penalties the law criminalizes under the current Penal Order, meaning that fewer cases are required to go to court.

What is a Penal Order?
A Penal Order is a judicial decision issued by a Public Prosecutor to decide whether a fine is an appropriate punishment for a criminal charge, without referring it to the relevant Court (a ‘Table of Schedules’ has been included below for more information on crimes that fall within this scope).

The Recent Amendment to the Law
From 1st October 2019 the Attorney General assigned Prosecutors the right to have authority to decide the outcome of certain cases. After investigating each individual case, the Prosecutor will decide whether to issue a Penal Order, depending on the type of crime, or refer the case to the Criminal Court. The Prosecutor can only authorise fines to those offenses listed in the Table of Schedules below.

The Attorney General, or the Prosecutors acting under the Attorney General’s authorization, may amend the ‘Decision of the Penal Order’. For example, the Penal Order may be cancelled or replaced with community service if deemed appropriate.
The Decision of the Penal Order shall be applied only to Federal Prosecutors, namely:

a. Abu Dhabi Federal Prosecution
b. The Prosecution of the Emirate of Sharjah
c. Ajman Prosecution
d. The Emirate of Umm Al Quwain Prosecution
e. Prosecution of the Emirate of Fujairah

Benefits of the Recent Amendment
The most identifiable benefits of the amended Decree are:

a. Faster judicial process
b. Greater clarity around fines and reduced fine amounts
c. Offences listed in the Table of Schedules will not incur jail time

Table of Schedules
The Tables of Schedules below set out the Articles applicable to the above revised Penal Order.

First: Federal Penal Code

Item Charge Article Fine
1 Intentionally causing inconvenience to others using wireless or non-wireless communication devices 298 AED 3,000
2 Accidentally burning something owned by others 310 AED 3,000
3 Consuming food or drinks in a public place during fasting during the month of Ramadan 313/1 AED 2,000
4 Forcing a fasting person to consume food or drinks in public during fasting during the month of Ramadan 313/2 AED 2,000 plus the outlet must be closed for a period of one month
5 Responsible for operating a food outlet during the day during the month of Ramadan without permission 313, 313/2 AED 3,000
6 Attempted suicide 335/1 AED 1,000
7 Accidentally jeopardizing the safety of another person (limited to minor injuries) 343/1 AED 1,000
8 Defamation of others (excluding public servant) 372/1 AED 5,000
9 Public insult (excluding public servant) 373/1 AED 3,000
10 Defamation or insult by telephone or in the presence of the victim and in the presence of others
(excluding public servant)
374/1 AED 3,000
11 Defamation and insult by telephone with no one present or in a written communication sent by any means (excluding public servant) 374/2 AED 2,000
12 Unauthorized use of a car, motorbike or the like without the permission or permission of the owner or owner of the motor vehicle 394 AED 1,000
13 Consuming food or drinks in a licensed shop and refusing unjustifiably to pay what is due

OR

Occupying one or more rooms in a hotel or leasing a vehicle or trailer at a licensed shop and refusing unjustifiably to pay what is due

395 AED 1,000 (Claims less than AED 20,000)

OR

AED 2,000 (Claims between AED 20,000 and AED 50,000)

14 Giving a check in bad faith with a value less than AED 50,000 401, 403 AED 2,000
15 Giving a check in bad faith with a value between AED 50,000 and AED 100,000 401, 403

 

AED 5,000
16 Giving a check in bad faith with a value between AED 100,000 and AED 200,000 401, 403 AED 10,000
17 Destroying or damaging third party property, whether movable or immovable, and making it unusable or disrupting it in any way whatsoever (when the act occurred in error) 424/1, 43 AED 1,000
18 Accidentally cutting, uprooting or destroying a tree or plant, owned by others, in a deadly way

OR

Accidentally destroying an existing plant or any plant or seed, owned by others, by spraying a harmful substance

OR

Accidentally destroying agricultural machinery or tools, owned by others, or making them unusable

425/1, 43 AED 2,000
19 Exhausting, torturing or abusing a domestic animal

OR

Refusing to take care of an animal whose care is your responsibility

432 AED 1,000
20 Accidentally causing the death or injury of a domestic animal owned by others 433/1 AED 500

Second: Federal Law No. (6) of 1973 on the entry of foreigner’s residence and its amendments

Item Charge Article Fine
1 Staying in the country illegally for a period not exceeding 90 days 1, 2, 1/21, 3 AED 1,000
2 Failure of the guardian or guardians to confirm the residence of a child within the period provided for by law 1, 2, 21 AED 1,000
3 Assisting someone to stay in the country illegally 1, 2, 1/21, 3, 36 AED 1,000

Third: Federal Law No. (21) of 1973 regarding traffic, traffic and amendments

Item Charge Article Fine
1 Driving a vehicle when suspended from driving by a Court Order or an Order from the Licensing Authority 50 AED 3,000
2 Driving without a driving license

OR

Driving a vehicle without the appropriate license for the vehicle type

51 AED 3,000
3 Transferring a license plate to another vehicle without the approval of the Licensing Authority 1/52

 

AED 2,000
4 Leaving the scene of a traffic accident, in which injuries have occurred, without an acceptable excuse 2/52 AED 2,000
5 Refusing to give name or address or giving incorrect data to police officers 56 AED 1,000

Al Dahbashi Gray can assist you. If you need any help in understanding the changes and the potential impact of the recent amendments, please contact us on info@adlegal.com.

UPDATE – DIFC Issues New Amendments to its Employment Law (Law No. 2 of 2019)

By Dennis Varghese

On 17 October 2019, the DIFC issued a consultation paper proposing amendments to its Employment Law No. 2 of 2019 (DIFC Employment Law). The consultation is open to all stakeholders (including employers, employees and advisors) until 18 November 2019, after which the DIFC will review comments and finalise/enact the legislative amendments.

The new DIFC Employee Workspace Savings (DEWS) scheme will replace the existing End of Service Gratuity (ESG) regime. For a detailed overview of the new DEWS scheme, review our article here.

In short, the introduction of the DEWS plan will allow DIFC employers to account for their End of Service liabilities on a monthly basis. Meanwhile, employees will have secure benefits, irrespective of an employer going out of business, while having the option to earn a return on an employer’s monthly contributions and to make their own contributions in a very cost-effective and simple way.

The amendments are expected to come into effect on 1 January 2020 (Commencement Date). This short document sets out a summary of the main amendments.

Is the new DEWS plan mandatory?

Yes, the DIFC proposes to replace the current ESG regime with a DEWS plan, whereby all DIFC employers will be required to make mandatory monthly contributions.

An employer wishing to use an alternate Qualifying Scheme instead of DEWS will need to obtain a Certificate of Compliance. The requirements for the Qualifying Scheme are set out in the new employment regulations, which will be introduced under Article 66 of the DIFC Employment Law, and are as follows:

  • it must be an Employee Money Purchase Scheme based on the definition provided in the UK Pension Schemes Act 1993;
  • it must provide for the payment of contributions by the DIFC company for each eligible employee at no less than the core benefits. Under the current ESG scheme, employers have to pay 21 days of an employee’s basic wage for each year of the first five years of service and 30 days of the wage for each additional year of service. This now amounts to 5.83 per cent and 8.33 per cent respectively. These percentages will now be paid by the employer to the DEWS plan scheme or another Qualifying Scheme on a monthly basis;
  • it must provide for the payment of benefits in the event that the employee leaves the company’s employment or service, or is otherwise entitled to withdraw their benefits (including where the individual reaches 65 years of age);
  • it contains stipulations which require that each Operator, Administrator, Investment Adviser and Fund Manager of the Scheme in question be regulated by a ‘Recognised Regulator’ (Recognised Regulators are financial services regulators who have approved status with the DIFC Board); and
  • the Qualifying Scheme must be a DIFC Trust, if the Qualifying Scheme is established in the DIFC.
    What are some of the main features of the DEWS plan?
  • The employer will be required to contribute to the DEWS plan on a monthly basis. The DEWS plan applies only to expatriates and does not include UAE or GCC nationals;
  • The employee’s accrued ESG pursuant to the current DIFC Employment Law can either be paid to the employee on termination of their employment, or alternatively it can be transferred into a Qualifying Scheme in favour of the employee at any time following its Commencement Date;
  • For any individual who commences employment with a DIFC company after the Commencement Date, they will need to be enrolled in a Qualifying Scheme by the 15th day of the month (for example, if an individual commences employment on 3 February 2020, their employer will need to enrol them in a Qualifying Scheme no later than 15 February 2020);
  • Employees will have the option to make their own contributions to DEWS if desired and will be given a choice as to how their contributions are invested;
  • Employees have the option to choose from five risk-profiled funds: low, low/moderate, moderate, moderate/high and high. The low/moderate risk fund will be the default fund. There will also be Sharia-compliant options available. The fee has now been settled at 1.33% per annum for the low and low/moderate options. It is still unclear whether the fee will be higher for the higher risk option and the Sharia-compliant option;
  • The funds of the DEWS plan will be legally held by Equiom as Trustee for the benefit of the employees, as opposed to the funds remaining under the control of the employers;
  • Zurich Middle East will be the administrator, whose role will be to facilitate employees enrolling into the DEWS plan.
    What are the next steps?

    It is advised that the DIFC employers undertake the following:

  • review the consultation paper and submit feedback, which can be done by completing the comments template and emailing it to consultation@difc.ae. The deadline is 18 November 2019;
  • determine their approach and enrol into the DEWS plan or consider a Qualifying Scheme;
  • consider strategy regarding accrued ESG benefit to 31 December 2019;
  • begin communicating any potential changes to employees at the earliest.
    For a full review of the consultation paper and the relevant regulations, click here.

    Al Dahbashi Gray can assist you. If you need any help in understanding the changes and the potential impact of the recent amendments, please contact us on info@adlegal.com.

Will the DIFC’s New Workplace Savings Scheme be a Positive Change?

By Dennis Varghese

With the recent introduction of its New Employment Law, which came into effect on 28 August 2019 (for an update on DIFC Law No. 2 of 2019 (“New Employment Law”), click here), the Dubai International Financial Centre (DIFC) is at the forefront of cementing its position as the leading financial hub in the Middle East, Africa, and South-Asia region.

The DIFC is now working on replacing its end-of-service gratuity (“ESG”) benefits scheme with a defined contribution scheme known as the DIFC Employee Workplace Savings (“DEWS”) trust scheme. This article aims to provide everyone, especially employers and employees based in the DIFC, with a brief overview of the current ESG scheme and the highly anticipated DEWS scheme which is expected to come into effect on 1 January 2020. At the end of this article is a Q&A section which aims to respond to any queries readers may have about the upcoming changes.

What is an End-of-Service Gratuity (ESG) Payment in the DIFC?

It is worth noting that ESGs are not unique. The UAE and the other five countries in the Gulf Cooperative Council (GCC) – Saudi Arabia, Bahrain, Kuwait, Qatar, and Oman – all operate similar ESG schemes (albeit with certain variations in calculations and specific termination conditions). But it has been a topic that has been causing much debate over the past decade, both in the DIFC and the GCC as a whole.

ESG schemes were introduced to ensure that when an employment relationship was terminated, employees without pension benefits received a lump sum payment to assist them during the period following termination or for them to put towards their savings.

The DIFC is regulated by a common law system and adopts an independent court system. The DIFC currently implements the defined-benefit ESG scheme. The minimum criteria for an employee to qualify for the ESG scheme is one year of continuous service. The ESG payment is calculated at 21 days basic salary for each year of service, for up to five years of service, and thereafter 30 days basic salary, for each subsequent year of service.

Key Takeaways of ESG in the DIFC

The ESG payment cannot exceed the amount equivalent of two (2) times the annual wage of an employee. It is calculated as follows (Article 66 of the DIFC Law):
a) An amount equal to twenty-one (21) days of the employee’s basic wage for each year for the first five (5) years of service; and

b) An amount equal to thirty (30) days of the employee’s basic wage for each additional year of service.
Employees have the option to receive pension contributions into a non-UAE retirement fund (or substantially similar scheme) instead of an ESG scheme payment, provided the aggregate contributions made by an employer is not less than the ESG payment the employee would have been entitled to receive (Article 66(7) of New Employment Law).

Why has the DIFC decided to shift away from the ESG?

Data provided by a leading international law firm revealed that the combined ESG liability of all employers operating in the GCC is estimated at more than AED 54.75bn (USD 15bn). Another survey, by Wills Towers Watson, which covered 300 firms, pointed out that a fifth of UAE companies face ESG liabilities of over US$15 million, with 88% of GCC companies surveyed having no plan to fund gratuities.

While the concept of being paid a lump sum of money at the end of employment may seem very attractive, ESG schemes cannot always be relied upon.

The Chartered Institute of Personnel and Development (CIPD), the professional body for HR and People Development, provided that one of the reasons ESG is seen as high-risk is because businesses keep employees’ gratuities in the corporate bank account and use the monies as working capital until it is due to be paid. This means the risk of an organisation not having access to the gratuity when it is required is very real. Worse, it is not currently mandatory for companies in the UAE to set aside payment for the ESG scheme. Therefore, where an employer is in financial difficulties and/or dissolves, employees may have limited prospect of recovering their full entitlement to an ESG. This can be a particular cause for concern during an economic crisis when many businesses may experience financial difficulties

The ESG scheme also does not take into account the full lifespan of an employee – only the years they have worked in each period of employment. This becomes a problem, especially for expatriates, when they reach their retirement age and are relying on the ESG payment to supplement their retirement fund.

A survey carried out by Insight Discovery disclosed that around 49% expatriates in the UAE are only able to save five (5) per cent or less of their monthly income, and only sixteen (16) per cent of expatriates have a fixed retirement plan. In comparison, the savings rate is much higher in other countries, for example, Switzerland, where the savings rate is forecasted to reach approximately eighteen (18) per cent in 2019/20. The survey also made it indisputable that UAE expatriates are eager to start a savings plan.

The move towards the DEWS scheme comes in line with the recent global employee benefits trends – see figure 1.

Figure 1: Source – The DIFC Employer’s Meeting: The Proposals for Reforming the minimum end of Service Gratuity (May 2019)

Highlights of the Proposed DEWS Scheme

Put simply, the DEWS Scheme is an opportunity to boost an employee’s retirement savings using a workplace pension scheme. The aim is to create a default position whereby all employees are signed up to a workplace pension in order to increase the proportion of employees saving for retirement.

The DIFC DEWS scheme will eventually eliminate the ESG scheme by offering employees a portfolio of global funds to invest their money in. The word ‘invest’ is key here, as employees will be able to allow their money to grow, instead of sitting idle in a bank account. It is expected that employers will contribute a percentage of the monthly salary to DEWS (the contribution rate is set to be the same as the current gratuity accrual rate), while the employees will also have the option to top up to their portfolio by making voluntary contributions through their salary. Employees will also be able to pick how their contributions are invested, choosing between low, medium and high-risk options. When leaving employment in the DIFC, employees will then receive both ESG scheme for service up until the date of the proposed change (1 January 2020), as well as the benefit from the new DEWS scheme.

Key Points to Note

1. A DIFC supervisory board will oversee the establishment of the DEWS Trust;

2. DEWS will be managed by Equiom, an international professional services group, as the master trustee and Zurich Insurance as the scheme administrator;

3. The DFSA will regulate the trustee and the administrator. The trustee will oversee the governance of the trust. The administrator will perform the operations of the trust;

4. The DEWS Trust will operate on a funded, defined contribution basis, investing contributions on behalf of employees and paying benefits on leaving service later, if requested.

The proposed changes also benefit employers by allowing them to know what their exact liabilities towards employees are at any given point. For example, in 2016, the DIFC Court of First Instance awarded a penalty of USD$ 1.5million against a company in breach of Article 18 of the DIFC Employment law, for failing to pay the employee his benefits within fourteen (14) days of termination of employment (a doctrine that has been partially overturned recently; you can read more about the recent change under Section-5 of our article on the DIFC’s New Employment Law: https://adglegal.com/news/difc-employment-law/).

Under the new DEWS scheme, employers will be required to make contributions every month, meaning cash-flow will be smoothed out over the entire employment cycle of an employee, rather than lump-sum payments having to be determined at the date of termination. The terms of existing ESG arrangements – for example, employees’ eligibility, the definition of the basic wage and the timing of payments — would remain in place to ease the administration of the DEWS. Failures by employers to comply with their obligations will likely lead to fines and other potential sanctions. It is also anticipated that outside of the DEWS scheme, employers will be able to establish their own qualifying schemes, the rules of which are expected to be announced by the end of September 2019.

Meanwhile, employees will benefit from:

  • Receiving their full end-of-service gratuity, irrespective of an employer going out of business;
  • Having their contributions professionally managed, cost-effectively and flexibly;
  • The chance to earn a return on their contributions through investments, which is currently not the case. DEWS contributions could be invested in a range of funds with varying risks;
  • Visibility and a choice as to how their savings will be managed, catering to a range of risk appetites and including sharia-compliant options;
  • Voluntary savings options on top of employers’ contributions and investments, offering an incentive to save more towards their retirement, of up to 100% of their salary and other forms of compensation via payroll.

A similar initiative, the Workforce Protection Program, is under discussion to be implemented by the Jebel Ali Free Zone (Jafza) soon. It is considered likely that the change to the ESG regime within the DIFC will spread to other free zones and the UAE mainland in order to modernise and standardise employee benefits and entitlements.

Question & Answers
1. What happens if my employer shuts down?

Any pension contributions you and your employer make will be held with the pension provider – not your employer. If your employer dissolves or becomes bankrupt, your pension fund will be ring-fenced, so your retirement savings will not disappear.

2. Is the scheme voluntary?

No, all DIFC employers and employees are required to participate in the DEWS scheme unless an employer operates a qualifying system of their own.

3. Who makes contributions to the scheme?

Employer contributions will be mandatory under the DEWS scheme. Employees will also be able to make voluntary contributions to it, up to 100% of their salary and other forms of compensation via payroll. As it stands, based on a fixed statutory formula based on the employee’s years of service and final salary, the contributions are expected to be cost-neutral compared to the existing gratuity system. These have yet to be finalised but are expected to be around 5.83% of basic salary for where service is below 5 years and around 8.33% above 5 years of service.

4. Can employers still provide a defined-ESG payment on leaving service?

From 1 January 2020, DEWS will be the minimum benefit basis. Employers can, however, choose to top-up DEWS benefits, if they wish to do so.

5. Can an employee undertake investments?

Yes, employees will be given the option to make investments or use the trustee’s default investment option, which is set according to the employee’s risk appetite. A Shari’ah investment option will also be available.

6. Who will influence or make the decision on the risk profile of the investments made in DEWS?

It is currently envisaged that the employers will be able to dictate a default risk profile option for investments made using employer contributions to ensure the investments undertaken by the employees are safe. It is also our understanding that employees will be able to choose their risk profile for investments, however, this is yet to be confirmed

7. What happens to the existing benefits?

The default position is that the ESG will accrue up to the changeover date (31 December 2019) between the current scheme and DEWS but will only be payable to the employee on their eventual termination and will be based on the employee’s final salary on termination.

8. Will the funds in the new scheme be forfeited if the employee is terminated for cause?

No, the funds will not be forfeited, and will continue to be the property of the employee. Contributions will be made from day one of employment. This will, however, require an amendment to the existing DIFC Employment Law, which currently does not entitle ESG payment to an employee who has not completed a minimum of 12 months of employment.

9. Will employees have the option to withdraw funds from the DEWS if they are still in DIFC employment?

No, whilst the employment with the contributing employer continues employees will not be able to withdraw funds. Withdrawing funds will only be possible when employment is terminated.

10. What happens when an employee leaves employment or transfers his employment?

When an employee leaves DIFC employment, they will receive ESG for service up to the changeover date i.e. 31 December 2019 and thereafter the benefit from the new scheme. If the employee decides to resign or transfer employment, the employee can elect to withdraw or leave their funds in DEWS, but no further employee contributions towards the plan will be possible. The decision to leave funds in the DEWS scheme would see a management fee applied.

11. How will an employee be updated about ongoing activities relating to their contributions?

It is currently predicted that employees will have full transparency on their investment portfolios in real-time (via an app on their phone, tablet or computer).

Al Dahbashi Gray can assist you. If you need any help in understanding the changes and the potential impact of the recent amendments, please contact us on info@adglegal.com.

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