Commercial Law in the United Arab Emirates Essay

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Introduction

Since the day it was established, the United Arab Emirates (UAE) has been a constitutional federation, meaning that law plays a significant role in many aspects of the UAE’s social, economic, political, and other activities. Legislation in the country comprises a plethora of distinct codes, covering a broad range of areas that include industrial operations, civil rights, immigration, intellectual property, financial operations, employment, and so forth. Considering that the UAE is currently regarded as a commercial hub in the Middle East, it is possible to assert that commercial regulations have particular importance in its society. Different nuances associated with implementing commercial and business laws in the country will be discussed in this paper, with special attention to the matter of contract validation and discharge.

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Most of the laws in the UAE legal system combine Islamic and European concepts. As McKenzie and Al Mulla note, the country’s legislation is based on “(i) civil law principles, most of which are heavily influenced by Egyptian law (which in turn is influenced by French law) and (ii) Islamic Shari’a” (6). Nevertheless, it is worth noting that the responsibilities and areas of coverage of the local Shari’a courts and the civil courts do not overlap. For example, although Islam is regarded as a primary source of law in the country, Shari’a principles are mainly applicable to social and criminal cases, while commercial and business issues are currently resolved with the help of civil courts and arbitration (Aly Khedr). As a whole, despite the possible differences in Islamic law and civil law concepts, both have a purpose of promoting democracy and justice in the UAE society.

Commercial Law: Importance

For a long time, the UAE’s economy was dependent on oil and gas output. However, acknowledging the finite nature of natural resources, the federal government is now actively promoting the development of domestic and international commerce and businesses. As Aly Khedr states, nowadays, “the country is home to many projects with international flavor.” In addition, McKenzie and Al Mulla observe that a significant number of large global enterprises have established their headquarters in the UAE (4). The liberalization of economic policies has been the primary reason for the country’s increasing commercialization and business internationalization. Today, the UAE legal framework is highly supportive of new investments in the local economy, as well as the latter’s development.

Many of the UAE’s key laws are contributing to the enhancement of the economic infrastructure in the county following the highest international standards. The New Federal Law on Commercial Companies is among these. As stated by Aly Khedr, this law obligates all enterprises operating in the UAE to establish a corporate governance framework as necessary to “ensure the protection of shareholder rights, achieve transparency, disclose financial data and improve the efficiency and integrity of the company’s director board.” In this way, in addition to focusing on profits, commercial regulations also promote corporate social responsibility, which is essential to minimize possible business-associated threats (such as unequal employment opportunities, financial fraud, and so forth) to stakeholders’ well-being.

Principles of Contract Validity and Termination in the UAE

In the context of economic liberalization, commercial and business laws play a vital role in regulating multiple activities and operations, including the establishment of agreements and discharge of contracts. One law that may be used as a guide for concluding valid contracts, as well as for their interpretation, is the Commercial Transactions Law. However, the UAE Civil Code offers a more detailed and comprehensive overview of contract-related matters and guides contract interpretation.

When drafting a contract, it is important to note the elements that must be present in an agreement to allow it to be accepted as valid. First, a contract must establish “a clear offer from one party and clear acceptance by the other party” (DMCC). Thus, this type of agreement should necessarily include the names of the parties and their credentials, the main subject of the parties’ interest, their responsibilities, and their obligations. Additionally, it should indicate execution timeframes, payment details, a period of contract validity, and specifications for agreement termination as well as actions in case of any party’s default. It is essential to note that the clarity of contract composition is pivotal in the UAE. Therefore, it is important to use unambiguous words and clarify complex terms if necessary to avoid misinterpretation. Contracts must be drafted in “good faith” or, in other words, to achieve mutual benefits and avoid any harm and loss (DMCC). When at least one of the parties fails to honor the concept of good faith in concluding a contractual agreement and deliberately deceives the other through either the use of incorrect or inaccurate terms or omission of important information, the contract cannot be regarded as valid.

Several approaches govern how the termination of agreements may be completed. The most common one is termination through compliance with previously agreed-upon, written contract provisions such as an approach to the end of particular terms and the completion of an offer. Other ways to terminate a contract include mutual consent, a court order, and operation of law (DMCC). In the first case, the parties may withdraw from the agreement when it is possible to return an object/value involved in a deal with the stipulation that it has remained unchanged. Second, contract termination by court order may happen when one party defaults and the other party does not want to continue a business relationship. Lastly, an agreement may be terminated under the provision of UAE law when an emergency occurs and, as a result, makes it impossible to adhere to the contract requirements.

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Conclusion

Major characteristics of the UAE legal system are substantially determined by the country’s cultural and historical background as well as the government’s strategic and developmental goals: diversifying the economic sectors and promoting non-petroleum industries. A plethora of legal frameworks and vehicles are used by the country’s authorities to attain these aims while maintaining justice and order in society. Overall, the government is undertaking great efforts to make sure that existing regulations meet stakeholders’ interests and are suitable for the current economic conditions. Therefore, the UAE authorities are continuously revising and amending the old laws and developing new ones.

In considering the local commercial legal frameworks, in particular, it seems they fulfill their purpose well. Different commercial and business laws and policies are helping to regulate various transactions, investment procedures, business operations, and contractual agreements that have the goals of benefiting both entrepreneurs and society as a whole through the promotion of their welfare. Notably, as with the UAE Civil Code, the country’s commercial law comprises an ethical component manifested in the implementation of such practices as corporate social responsibility and corporate governance. This observation emphasizes the humane aspect of the UAE legal system and shows that the improvement and maintenance of citizens’ well-being is a primary objective.

Works Cited

Aly Khedr, Ahmed. 2018, Web.

DMCC. 2016, Web.

McKenzie, Baker, and Habib Al Mulla. 2017, Web.

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IvyPanda. (2021, June 30). Commercial Law in the United Arab Emirates. https://ivypanda.com/essays/commercial-law-in-the-united-arab-emirates/

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"Commercial Law in the United Arab Emirates." IvyPanda, 30 June 2021, ivypanda.com/essays/commercial-law-in-the-united-arab-emirates/.

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IvyPanda. (2021) 'Commercial Law in the United Arab Emirates'. 30 June.

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IvyPanda. 2021. "Commercial Law in the United Arab Emirates." June 30, 2021. https://ivypanda.com/essays/commercial-law-in-the-united-arab-emirates/.

1. IvyPanda. "Commercial Law in the United Arab Emirates." June 30, 2021. https://ivypanda.com/essays/commercial-law-in-the-united-arab-emirates/.


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IvyPanda. "Commercial Law in the United Arab Emirates." June 30, 2021. https://ivypanda.com/essays/commercial-law-in-the-united-arab-emirates/.

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