The Bankruptcy Law stipulates a framework for companies in financial distress to avoid liquidation and further ensures employees, creditors, debtors, stakeholders, owners and directors of the organizations proceeding through court-led insolvencies. The Bankruptcy Law promulgates 230 articles and initially contributes to bringing comfort to companies/individuals suffering through financial issues, ensuring more protection for both debtors and creditors. Ever since the promulgation of the Bankruptcy Law, it has absolved risks of arrest, fines, longer prosecutions, and decreased the role of special tribunals, which used to dictate the course of insolvencies before the application of it. The UAE Bankruptcy Law (Federal Decree, Law No. 9 of 2016) was promulgated as a response to the 2008 global financial crisis, which severely hit the UAE. This law was developed on the foreground of a bailout process in the UAE Law, and repeals Volume 5 of Federal Law No. 18 of 1993 on the Commercial Transactions Law as a replacement. Both parties, including the creditors and debtors, enjoyed such promulgation, as it secured them from the brink of collapse. The UAE Bankruptcy Law is regulated for commercial companies, institutions owned by the UAE or any regional Emirate government, bonafide traders and onshore companies established in the UAE. The law excludes jurisdiction on companies established in the financial free zones and non-trading individuals, which will remain under the purview of the UAE Civil Code in the event of financial distress and will enface the risk of legal prosecution. The UAE Bankruptcy Law states that members involved in the liquidation of the company are accountable for an AED one million fine and up to five years in prison if found guilty of manipulating records by inflicting damage to the creditors, embezzlement, acknowledgement of unpayable debts, misleading the court in their application for any of the processes in the UAE Bankruptcy Law, or propagating false figure of their paid-up capitals.

Federal Decree-Law No. (19) of 2019 (on the Insolvency of Natural Persons)

The UAE Cabinet on August 29th 2019 promulgated with a Federal Decree the law No. 19 of 2019, to regulate insolvency cases by creating conducive conditions for individuals facing financial difficulties and protecting those who are unable to pay their debts from going bankrupt. The insolvency law is albeit different from her precursor, the bankruptcy law, which was promulgated by Decree-Law No. 9 of 2016, particularly in the rescue of laden-bid debtors. The Insolvency Law for Natural Persons applies to the status of a natural person who is earlier not engaged in economic activity and is by default, not a trader. Subsequently, the unification purpose of the two laws is the same, as both are promulgated to shield the common interests of the creditor and the debtor in a fair and balanced manner. The risk is shared through significant methods to relieve the debtor from financial prosecutions and enable them to clear their accumulated debt. The first law was a Creditors paradise, while the second Law gives the debtor his/her right to evade substantial prosecution and await goodwill.

DISPUTE SETTLEMENT DELAY AT THE COURTS

The pandemic outbreak took place almost immediately after the promulgation of the Federal Law no. 19 of 2019. The outbreak of COVID-19 is affecting litigation and arbitration in various ways, ranging from increased use of remote hearings to general court closures, depending on the countries and institutions concerned. The UAE is no exception to the rule, and hence subsequent delays have caused the arbitration trials to a slower pace than ever. The Dubai Courts website declares that the Courts of First Instance, Appeal and Cassation have been operating remotely since April 16th. Many hearings have taken place online ever since then.

The temporary suspension is part of the lockdown, which has caused the suspension of several public places due to the outbreak.

Although the ADGM, DIAC and the DIFC Courts will continue services as normal since they had already been channelled through online procedures. 

CONCLUSION

In this regard, subsequent co-operation between debtors and creditors could win precious goodwill, as the processes are managed by courts and court-appointed officials. Given its recent promulgation, it is quite obvious that the implementation of such decrees will take time for the common man to understand the further uncertainty loops at stake due to the outbreak of COVID-19. 

The common understanding about these laws is that they will work on a case by case basis and the will of the creditors who would be tested for their patience against the insolvency of their debtors. Furthermore, a challenge for all attorneys, as legal experience will be tested to the forelock, as it may require lawyers a while to revert with solutions conducive to the best interest of their clients. The structure of the law would also be put to the test, as the current situation surely causes delays to arbitration and court hearings. SMEs might be more eager for the process to resume, but Multinational Companies may yield their time to overcome a settlement, as they have better purchasing powers than  most other players of the market. We would like to emphasise that the fear of the debtor escaping the scenario is no longer to be feared of, as all government departments in the UAE are interlinked, and a person put on trial or investigation will not be allowed to exit the country. Moreover, the current closure of the UAE airspace due to the pandemic will also enable the debtors to remain in the Country.