In 2022 the United Arab Emirates introduced a major legislative change through Federal Decree-Law No. 50/2022 which changed the commercial transactions landscape in the country. This new UAE Commercial Transactions Law aims to increase clarity, transparency and fairness in business dealings and position the UAE as a business and commerce hub globally. For business owners and corporate lawyers, understanding these changes is key to compliance and navigating the new business in compliance of the current law.

In this article we will break down the key highlights of the law, its impact on compliance and what you need to be aware of.

1. Objectives of the Law

The UAE Commercial Transactions Law aims to modernise commercial practices and strengthen regulatory frameworks across sectors. The law is designed to:

·       Increase Transparency: The law clarifies obligations for both parties in commercial contracts, reducing grey areas that can lead to disputes.

·       Boost Economy: By having a solid legal framework for businesses, the UAE wants to attract more foreign investments and grow the economy in a diversified manner.

·       Fair Competition: The law aligns with international standards to promote a fair business environment for the investors.

These objectives showcase the UAE’s commitment in becoming a business destination for local and international companies to operate seamlessly.

2. Contracts and Commercial Transactions

One of the main areas came into impact by the new law is how commercial contracts are drafted and executed. The law clarifies the obligations of the parties in the contract and

that all commercial agreements are based on mutual consent and fairness. Key points:

·       Contracts Must Be Unambiguous: Businesses must ensure their contracts clearly define the rights and duties of each party to avoid disputes. Any ambiguity in contract terms can now be interpreted more strictly by the courts.

·       Termination due to Non-Performance: Parties must perform their obligations as per the contract. If either party fails to meet their obligations the other party can terminate the contract or seek legal remedies.

·       Digital Transactions: With the rise of e-commerce, the law accepts electronic signatures and contracts executed electronically in line with the UAE’s digital transition world. Thus, any contract executed between the parties through digital means is acceptable before the courts.

3. Compliance

Compliance with the UAE Commercial Transactions Law is key to avoid legal penalties and maintain a good reputation in the market. Some of the key compliance areas are:

·       Keeping Financial Records Accurate: Businesses must keep financial records and books in order as these may be reviewed in case of any legal disputes or audits.

·       Adhering to Payment Terms: The law emphasizes strict compliance with payment terms agreed in the contract. Delay or default in payment can now lead to more severe consequences including compensation payment or lawsuits.

·       Corporate Governance: Companies must follow best practices in corporate governance especially in areas like decision making, reporting and transparency. Legal teams must ensure that boards of directors and executives are aware of their responsibilities

4. Obligations of Business Owners

The new law has several obligations for business owners to comply with on a day-to-day basis. These are:

·       Liability for Commercial Acts: Business owners are responsible for the acts of their employees and agents in carrying out commercial activities. This means any fraudulent or negligent acts can lead to liability for the company.

·       Termination Clauses: The law allows termination of contract if one party fails to perform its obligations making it easier for businesses to exit non-performing contracts. However, clear termination clauses must be included in the contract to avoid future disputes.

·       Force Majeure: In line with global business practices the law recognises force majeure events (such as natural disasters or pandemics) as valid reasons for non-performance of a contract. Businesses must ensure force majeure clauses are well defined in their commercial contracts, in order to safeguard their interests.

5. Arbitration and Dispute Resolution

The UAE continues to promote arbitration as the preferred method of dispute resolution and the new Commercial Transactions Law has further strengthened the arbitration framework;

·       Arbitration Clauses: Contracts can include arbitration clauses that refer disputes to local or international arbitration centres such as the Dubai International Arbitration Centre (DIAC).

·       Enforcement of Awards: The law ensures that arbitration awards are enforceable in the UAE courts so businesses can resolve disputes outside the courtroom faster and in a effective manner.

6. Digital Transformation

The new law acknowledges the growing role of digital transactions in the UAE. As businesses are increasingly using online platforms for their commercial activities, the law caters to modern digital practices:

·       Electronic Contracts: The law confirms the validity of electronic contracts and signatures so businesses can conduct transactions online.

·       E-commerce Protections: The law provides more protections for e-commerce businesses so digital transactions are secure and binding.

Things to consider as per Federal Decree-Law No. 50/2022 is in place, businesses must act now to comply.

• Review Existing Contracts: Must review and update existing contracts to ensure they comply with the new law especially in terms of clarity, performance obligations and dispute resolution mechanisms.
• Update Internal Policies: Businesses must update internal policies and procedures to comply with the new law especially in areas like financial reporting, contract management and employee conduct.
• Get Legal Advice: Consulting with legal experts of DY Lawyers and Legal Consultants is key to understanding the full impact of the new law on your business. A legal review will help you identify potential risks for your business, and will help you improve and make compliance as per the provisions of the new commercial law.

Conclusion

The UAE Commercial Transactions Law is a major milestone in regulating and modernising the UAE business landscape. Business owners must be advised to consult with the dedicated team of lawyer to comply and avoid legal traps. Whether you are a startup, growing business or large corporation, staying up to date with the legal landscape will help your business succeed in the UAE market.

You can contact us at +971551470302 and can easily get in touch with our best corporate and commercial lawyer in Dubai, to provide you with end-to-end legal support and help your business to grow in an effective manner.

Disclaimer: The content of this article is provided for basic informational purposes only and shall not be construed as legal advice. Readers are strongly advised to consult a qualified lawyer before taking any legal action. The law firm and its lawyers assume no liability for any actions taken based on the information contained herein.