Legal System for Business in the United Arab Emirates Essay

Introduction

Understanding the specifics of the state legal system is crucial for a successful performance of an organization in the target market. An in-depth analysis of the subject matter allows avoiding a range of issues associated with the management of essential business processes, such as the purchase of the necessary resources or communicating with potential partners. Therefore, a profound assessment of the UAE legal system is imperative for a successful integration of an organization into the target market.

Analysis

Before going any further, one must consider the existing legal systems. Thus, the premises for a better understanding of how the UAE legal system developed can be built.

Divergent Legal Systems: Overview

There is a range of classifications of legal regulations. Traditionally, common, and civil laws are viewed as the foundational ones. However, other specimens also exist.

Common law

Initially developed as a middle ground between the Nordic and the Saxon legislations in the 11^th century, the system boils down to a set of propositions that ostensibly allow settling an argument. Common law makes the bulk of the UAE business legal system, although the influence of the Shariah law is also tangible in it.¹

Civil law

Unlike the common law, where the judge does not need to get themselves acquainted with the facts, the civil law compels the former to carry out a detailed analysis of the case.

Private law

Private law helps settle legal disputes between persons. Property, liability, and obligations-related issues typically belong to the private law domain.

Commercial law

Commercial law is supposed to help address business-related disputes specifically.

Religious law

In a range of states, most regulations are driven by religious beliefs and concepts, and the UAE is a graphic example of the specified phenomenon.

Islam

The Shariah law is followed closely in Muslim states. According to the Shariah law, Usury (Ruba), or the payment of interest, is prohibited in Islamic states. Furthermore, the businesses dealing with gambling, prostitution, pornography, alcohol, etc., are deemed as Haraam, or impermissible, investments. The Shariah law has had a profound impact on the development of the current business legal system used in the UAE.²

Hindu law

Another legal system based on religious beliefs, the Hindu law creates premises for the existence of the unique phenomenon known as the joint Hindu family business.

Contract law

The identified type of legal system compels the parties involved to meet their contractual obligations.

Protection of intellectual property

In the wake of the digital era, the significance of addressing the property issues has grown. The regulations dealing with the subject matter are becoming increasingly popular in the global economy realm.

Nordic Europe laws

Related to the civil law standards, the regulations used in Scandinavia are, nevertheless, slightly different from the rest of the states.

Customary laws

Tribal ideas as the basis for legislation are not very common, yet they warrant a mentioning.

Criminal law

The criminal law system helps manage malpractices in the context of the business environment.

Family and Essential Characteristics

Legal influences

When tracking down the origins of the UAE legal system, one might be genuinely surprised to find out that it, in fact, was based on the tenets of the British regulations, as well as influenced by the French and Roman ones.³ Naturally, the impact of the Islamic laws is also quite tangible and even predominant, yet the traces that the said legal systems have left in the current UAE legislation and especially business regulations are quite palpable. For instance, the impact of the French and Roman legal principles on the current UAE jurisdiction can be traced in the concept of free trade zones, which currently exist in the target environment as the middle ground for carrying out transactions between foreign companies and the firms that belong to the UAE business realm.

The fact that there are two main types of regulations in the UAE should also be viewed as the impact of the French and Roman legacy. By splitting the existing laws into the ones that are under the federal jurisdiction and the laws that belong to the local one, the UAE authorities create prerequisites for combining the principles of the civil law and the ideas listed in Quran as the basis for the management of the related issues, including business and financial transactions. Consequently, orderliness is introduced into the UAE legal processes:

There are two main types of laws in the UAE. Federal – applicable to the UAE as a whole and issued either by the legislative body or by the ministers of each ministry (ministerial order); local – decree and orders apply only to a particular emirate (passed by the ruler or crown prince of a particular emirate and issued by a member of the royal family of that emirate).⁴

When determining the reasons for the identified phenomenon to be witnessed, one will have to address the fact that the UAE has been under the aegis of the British empire for quite a while, which has definitely left its mark on the way in which the UAE legal system has been evolving afterward. Particularly, the realm of the UAE civil law has been affected greatly by the British legal system. Specifically, the concept of free trade zones, which has been determining the course of the UAE business development, has been affected by the said set of regulations.

However, when it comes to determining the legal system that has had the definitive effect on the development of the UAE business regulations are they are currently known, one must mention the Egyptian law.⁵

Islam law and common law

As stressed above, the UAE legal system, in general, and the set of laws used in the business environment, in particular, borrows heavily from the Shariah laws. In fact, the identified legal standards make the bulk of the UAE legal system.⁶

Characteristics: description

When considering the primary characteristics of the UAE legal system, one must mention the fact that it is represented by a mixed system as opposed to the pure Shariah law.

Reasons for the Choice of the Family

As explained above, the UAE system can be viewed as a concoction of two principal concepts, i.e., the one of the common law, and the one of the Shariah law.⁷ Therefore, the system technically belongs to two families, particularly, the common and the religious ones.⁸

The reasons for choosing the said families are rather basic. When considering the religious law family as one of the crucial foundations on which the current UAE business regulations are based, one must consider the fact that most commercial and business-related procedures are guided by the principles of the Islamic law. Particularly, complete compliance with essential Shariah concepts deserves to be mentioned.

The identified requirements concern the management of the processes related to production, instrumentation, operations, management, practices, as well as other domains of the UAE business environment. Particularly, according to the current corporate governance standards established in the UAE, the Shariah principles are bound to serve as the foundation for managing all processes and issues, including risks-associated concerns:⁹

In addition to conventional banking risks, the IIFS are also exposed to other unique risks, such as rate of return risk and displaced commercial risk (DCR), and specific aspects of operational and reputational risk such as Shariah non-compliance risk and fiduciary risk.¹⁰ Therefore, the reasons for choosing the religious law family as one of the principal systems on which the current UAE business regulations rest is quite justified. As far as the civil law is concerned, the UAE legal system also factors in the said area due to numerous borrowings from the civil law principles of European states.

Differences between the UAE and the UK Legal Systems

The UK legal system was chosen as a point of reference for and the item to be compared to the UAE law mainly because the two systems are related to each other historically. As explained above, the British law became one of the foundations for the further evolution of the UAE legal system at some point in history, yet the further evolution of both frameworks occurred independently. Therefore, comparing the two and determining the way in which they are different from each other is going to be a rather curious experience.

Furthermore, the comparison will shed more light on the possible routes for the further development of the UAE legal system. To be more specific, the problems that it currently has can be outlined, and the premises for addressing them based on the experiences of other legal systems can be created.

Last but definitely not least, the comparison of the two approaches toward managing legal issues may serve as the tool of reconciliation of disputes between the two philosophies. There is no secret that conflicts are an integral part of operating in the contemporary global economy realm. With the need to engage in consistent cross-cultural communication, misunderstandings and misinterpretations are inevitable; more importantly – they are necessary. By focusing on the aspects that make the two systems different, the representatives of both will learn to respect the other and, therefore, become able to develop a compromise for the further successful cooperation.

One may also consider the issue of the copyright law as one of the primary areas of concern for the businesses operating in the UAE environment. In the wake of the digital era and a rapid technological progress, there is a consistent need in addressing the problem of copyright. The UAE jurisdiction can be defined by a very careful and elaborate approach to the copyright issue. Particularly, the fact that the UAE countries have established a set of very rigid regulations regarding the violation of the copyright law deserves to be mentioned.

While the promotion of enhanced security measures against digital pirating and similar activities carried out in the online business realm helps protect the rights of individuals, companies are likely to suffer dire consequences due to the problems in the current approach toward managing the copyright issues:

The impact will be negatively felt by businesses currently using the 25 year limit to produce materials such as websites, reference books, guide books and catalogues featuring photographs and artwork that have regained their copyright protection. However, there may be arguments to raise in defence of this use, such as whether the claimed copyrightable work actually qualifies for protection and ownership rights in the first place.¹¹

In other words, there is a significant difference in the way in which the concept of cybercrime, in general, and the infringement of authors’ rights in the digital environment, in particular, is perceived in the UAE legal system and the systems of other states. The UAE regulations seem to pay a considerably greater attention to the problem of digital rights, particularly, the problems associated with the copyright. The emphasis on the need to protect the rights of authors is an essential characteristic of the UAE legal system.

Sources of law

The fact that the UAE legal system, on which its current business regulations are based, is founded on the tenets of the Shariah law deserves to be mentioned as the primary characteristic that sets it aside from the British law. The latter, in its turn, is rooted deeply in the European Community Law, International Treatises, and the principle of equity as the fundamental principle of managing legal issues: “The 1998 Human Rights Act in the United Kingdom was a measure to incorporate the European Convention on Human Rights into British law.”¹²

System structures

The UAE legal systems include the criminal law, the judicial system (i.e., the federal and state court systems), the personal status law, and the regulations related to the social security. The said structure is quite different to the one established in the UK, where three separate jurisdictions (the English law, the law of Northern Ireland, and the law of Scotland) are established. Despite the differentiation between the three, each of them is based on the principle of separation of powers (i.e., the existence of the judicial, legislative, and executive branches of power). The threefold system stands in contrast to the standards established in the UAE. Furthermore, the concept of a precedent as the basis for the further decision-making regarding similar instances can be considered the element that is inherent to the British legal system and cannot be traced in the one of the UAE.¹³

Levels of execution

The way in which the UAE authorities are assigned with their roles and responsibilities in the context of the UAE economy is an especially important characteristic of the current legal system. The Shariah law, which is viewed as the set of divine laws that had been revealed by God and then written in the Quran, covers a wide range of business activities, which means that the state governments can only use their authority to address the cases that are not covered in the Quran.

Delving deeper into the specifics of the UAE and UK business laws, one must mention that the approaches toward mergers and acquisitions are quite different in each. The identified issue is especially important in the context of the contemporary global economy, where organizations use mergers and acquisitions as a crucial part of their exit strategies. In light of the increasing competition levels, the suggested approach seems quite reasonable for most organizations, which makes mergers and acquisitions essential elements of operating in any market.

Thus, taking a closer look at how mergers and acquisitions are handled in the UAE environment is crucial. For instance, it is essential to keep in mind that mergers and acquisitions are possible in the UAE economic realm even in case a firm is facing the threat of liquidation. Therefore, caution is required to make sure that the existing risks are avoided successfully. Commercial laws, thus, can be viewed as another element that sets the UAE and UK legal regulations apart.

Last but definitely not least, the fact that the UAE legal system is heavily influenced by the state religion needs to be addressed In contrast to the British legal system, which is guided by the democratic principles heralded as foundational in the constitution, the UAE legal system is shaped by the philosophy of Quran. As a result, a range of standards set in the UAE business environment stem directly from the ideas listed in Quran. As stressed above, the concept of Haraam determines the restrictions imposed on the import and export of goods. The identified phenomenon stands in sharp contrast to the UK legal framework, which does not imply compliance with any of the existing religious concepts.¹⁴

Understanding the Nature of the UAE Legal System

Purpose of the Understanding

A deep insight into the nature of the UAE legal system is crucial for the further improvement of its economy, particularly, the efficacy of business processes. Operating in the global economy realm implies that organizations should be able to build strong ties with other companies, including foreign and international ones. The process of establishing a cross-cultural conversation, in turn, implies that a range of transactions should be carried out between the said companies.

While the global economy realm dictates uniform business management standards, the success of a range of processes hinges on a deep understanding of the legal systems in which specific companies exist. The UAE, in turn, has established a strong presence in the global market, which means that learning more about the specifics of legal standards that UAE firms follow is a crucial step toward improving the overall efficacy of the cooperation process. Therefore, a deep insight into the nature of the UAE legal system is bound to become the foundation for creating stronger ties in the global business community and contributing to the development of a cross-cultural conversation between organizations.

The exploration of the UAE legal system and the effects that it has on its business processes becomes all the more significant once the phenomenon of free zones is addressed. By definition, free zones are the areas in the UAE where the processes associated with trading are carried out according to a set of specific regulations as opposed to the legal principles by which they are guided in the rest of the UAE. In fact, the very existence of free trade zones shows that the legal framework according to which the trading processes are regulated in the country is quite convoluted and difficult to understand for someone who is not familiar with the UAE traditions and religion.

Providing the environment in which industry-specific activities scan be carried out, free trade zones serve as the means of temporary reconciliation between the global trade regulations and the ones that are currently deployed in the UAE.

Even though free trade zones can be viewed as the common ground on which business interactions between the UAE companies and foreign businesses can flourish, there is a necessity to establish a more profound link between the members of the global community and the representatives of the UAE culture.

Establishing a legal presence in the UAE is another step that international organizations may need to consider when expanding into the identified market. Indeed, with the increasingly large number of opportunities that the UAE market has to offer, the necessity to study the specifics of the state legal standards and in which they affect the further establishment of an organization in the environment of the state.

A closer focus on the essential characteristics of the UAE legal framework will also serve as the means of developing a deeper understanding of the export- and import-associated processes in the UAE. Particularly, it is crucial to bear in mind that the current legal system of the UAE permits the state authorities to exert control over the export and import of products and services. The identified control includes the ability to prohibit the said procedures in the state, as well as restrict transiting or transshipping products and commodities. Furthermore, the licensing issues need to be explored in depth and addressed accordingly before entering the economic environment of the UAE.

Seeing that the said domain is also controlled largely by the state authorities, it is imperative to identify the essential legal standards and regulations by which the processes in question are guided so that misunderstandings and possible legal impediments should be avoided successfully. For instance, when transporting electronic devices so that they could be sold in the UAE market, one must keep in mind that the Telecommunication Regulatory Authority of the UAE must make the said products type approved so that they could be sold legally; otherwise, no possible transactions can be carried out in the UAE market.

Thus, a detailed study of the UAE legal standards and regulations is crucial for successful transactions in the identified market. Moreover, by creating an elaborate infrastructure and improving the transportation and transaction issues, one is likely to create prerequisites for creating an impressive Supply Chain Management (SCM) strategy. The latter, when devised and implemented properly, is likely to propel any organization to the top of the target market, or, at the very least, help the company take its niche successfully and establish a very strong presence in the desired environment.¹⁵

Indeed, by definition, SCM suggests that an efficient system of managing “upstream and downstream relationships with suppliers and customers in order to deliver superior value in the final market at less cost to the supply chain as a whole.”¹⁶ In other words, reducing the concept of SCM to mere logistics- and transportation-related processes would be a mistake, yet one must admit that the design of an efficient infrastructure determines a significant part of a company’s success in the target economic environment.

The exploration of the UAE legal system, in general, and its effects on the business-related processes, in particular, will show that the issues associated with the transportation of products and raw materials are regulated by the state authorities and, therefore, require close attention of the organizations that have decided to operate in the UAE economy environment. Thus, by focusing on the specifics of the UAE legal system, one is likely to avoid a range of complications concerning the transportation and logistics processes, thus, improving the firm’s performance and achieving impressive success.

Furthermore, a detailed analysis of the factors that have affected the development of the UAE legal system is crucial since it allows avoiding a range of financial risks. In light of the fact that the UAE banking system witnessed an impressive crisis in 1980s and 1990s, a tighter control has been established over the banking processes since then. When entering the economic realm of the UAE, one must keep in mind that the caution with which the Central Bank approaches financial transactions may hamper the economic growth of the organization and cause certain delays in the transportation of the relevant goods and supplies. Consequently, an elaborate strategy for managing the associated financial risks must be designed:

The decrease in the average DER suggests that before the crisis companies depended heavily on debt in order to finance projects during the property boom; while they showed less dependency on debt after the crisis, taking into consideration high interest rates and enduring a cost which is higher than the ROE.¹⁷

Without the specified insight into the way in which the UAE legal system operates, one is likely to fail miserably when establishing a presence in the UAE market. Herein lies the significance of exploring the nature and current stage of the UAE legal system development. A closer look at the way in which the current system operates, on what factors its existence hinges, etc., will serve as the foundation for successful decision-making in the context of the UAE market.

The banking issue is especially important since it implies that an elaborate system of financial risks management must be designed so that a company could succeed in the market. Even though the current UAE economic situation can be described as a slow recovery from the effects of the 2008 crisis and the associated issues, there are still numerous impediments to the companies that are willing to explore the UAE economic environment.

The lack of trust that Emirati banks put into foreign organizations is likely to become a significant obstacle on the way to the further expansion and the development of the UAE market. However, with a detailed analysis of the identified issues and a deep understanding of how the current UAE economy works, one is likely to become successful despite the issues that the state financial system is facing at present.

Furthermore, it is crucial to realize that, despite the seemingly great cultural differences between the UAE organizations, European firms, American companies, etc., there is a common ground on which the current legal system used in the Emirati business environment was built. Even though there might be significant differences between the said cultures, the fact that the UAE legal system and the European ones originate from the same source and have similar roots is likely to serve as the means of reconciling the differences and promoting compromise as the foundation for the negotiation processes in the environment of the UAE market.

It is essential to bear in mind that the negotiations occurring between the companies belonging to different cultures may result in a disappointment due to the possibility of a culture clash. However, as soon as the participants take deep introspect into the history of the UAE legal system and the ways in which it was built, as well as how it affects the current business-related transactions, the parties involved are likely to realize that there are more similarities between the two systems than they might have thought initially. As a result, a range of conflicts can be settled.

Benefits from the Comparative Study

Apart from engaging in a historical analysis of the UAE legal system and its effects on business transactions, one must also consider comparing it to other legal frameworks that are currently deployed in the business environment. Furthermore, a comparison to the legal strategy adopted in the global market must be explored. A comparative study will shed light on not only the possible impediments to successful business transactions but also the reasons for the identified impediments to exist. As a result, the very essence of international interactions will be captured, and the opportunities for improving the quality thereof will emerge.

Furthermore, a comparative analysis of the statutes that define the course of the state economy development and the choices made in the business environment is bound to help improve the relationships between the stakeholders involved. For instance, the legal issues associated with running a business in the UAE may concern the communication between employees and their employers.

Thus, by comparing the frameworks used by the UAE and other states, one will be able to determine possible issues in the communication between the staff members and the company. The rights of the parties involved will not be infringed, either, once a profound comparative analysis is carried out, which is another essential advantage of an in-depth exploration of the links between the UAE legal system and the ones of other states. With the differences that often contribute to a striking contrast between the UAE legal framework and the ones that are adopted by other states operating in the global market, there is a need to promote better understanding and help the states participating in the trading process avoid confrontations between the key participants.

The exploration of the subject matter will serve as the foundation for avoiding a range of legal issues, such as the infringement of employees’ rights or incompliance with the legal standards established in the UAE. Even though the UAE labor laws are not very difficult to understand and do not contain any complex notions, the fact that they are based on Quran and the Shariah law creates a range of possibilities for the people that enter the target realm to make a plethora of mistakes. A comparative analysis will provide a deep insight on how the relationships in the UAE workplace are built, thus, avoiding the possibility of rights infringement of either side.

A better understanding of the competition law, as well as the problems and opportunities that companies may face in the UAE economy when entering the target market can also be viewed as an argument in favor of conducting a comprehensive comparison between the UAE legal system and the ones that are adopted in other states as the foundation for making business-related decisions. There is no secret that, when entering the realm of a foreign market a company needs to make sure that it has a strong competitive advantage that will allow it take a specific niche in the market or even climb to its top. Particularly, an overview of the current competitors and the competition levels of the market, in general, is a necessity.

However, the identified study of the target market will be pointless unless an in-depth assessment of the competition laws that are established by the state authorities is conducted. The specified task is especially significant for the firms that enter the UAE economy realm since the competition laws are quite specific in the state. Therefore, a profound analysis of the differences between the UAE legal system and the ones of other states will allow for a significant increase in the number of opportunities for improving a company’s competitive advantage in the UAE market and even gaining an impressive amount of influence in the identified economic environment.

Conclusion: Legal System in the UAE

In order to succeed in the target market and become competitive, an organization must study the legal framework according to which it operates. The identified process is especially important for the companies entering the realm of the UAE market since it is significantly different from the ones of Europe, particularly, the UK market. Because of the heavy influence that the Quran laws have on the development of relationships in the identified realm, it is crucial to make sure that an in-depth study of the UAE legal specifics should be carried out.

Particularly, the recent changes to the copyright laws and the concept of digital rights should be regarded as especially significant. Furthermore, certain financial issues, such as the regulations concerning the banking processes need to be taken into account when expanding into the target realm. However, the fact that the UAE legal system is influenced heavily by the French and Roman legal principles should also be borne in mind as the factor that is likely to help establish a link between different legal systems.

Bibliography

Clark, Woodrow W. W. Global Sustainable Communities Handbook: Green Design Technologies and Economics. New York, NY: Butterworth-Heinemann, 2014.

Dasare, Himanshu. “How Changes to UK Copyright Laws Offers Greater Protection for Designers,” Digital Arts, 2015.

Ercanbrack, Jonathan. The Transformation of Islamic Law in Global Financial Markets. Cambridge, Ma: Cambridge University Press, 2015.

Islamic Financial Services Board. Guiding Principles on Stress Testing for Institutions Offering Islamic Financial Services [Excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes] (2012). Web.

Oliveira, Alexandre, and Anne Gimeno. Executing the Supply Chain: Modeling Best-in-Class Processes and Performance Indicators. New York, NY: FT Press, 2014.

Pillai, Husam-Aldin N. Al-Malkawi Rekha. ‘The Impact of Financial Crisis on UAE Real Estate and Construction Sector: Analysis and Implications.’ Humanomics, vol. 29, no. 2, 2013, pp. 115-135.

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Slapper, Gary, and ‎David Kelly. The English Legal System: 2015-2016. New York, NY: Routledge, 2015.

Footnotes

1. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 19.
2. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 22.
3. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 54.
4. Woodrow W. W. Clark, Global Sustainable Communities Handbook: Green Design Technologies and Economics (New York, NY: Butterworth-Heinemann, 2014): 415.
5. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 34.
6. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 36.
7. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 45.
8. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 47.
9. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 48.
10. Islamic Financial Services Board, Guiding Principles on Stress Testing for Institutions Offering Islamic Financial Services [Excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes] (2012). Web.
11. Himanshu Dasare, “How Changes to UK Copyright Laws Offers Greater Protection for Designers,” Digital Arts, 2015.
12. Wayne Sandholtz, “How Domestic Courts Use International Law,” Fordham International Law Journal, vol, 38, no. 5, 2015, p. 603.
13. Gary Slapper and ‎David Kelly, The English Legal System: 2015-2016 (New York, NY: Routledge, 2015), p. 118.
14. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 63.
15. Jonathan Ercanbrack, The Transformation of Islamic Law in Global Financial Markets (Cambridge, Ma: Cambridge University Press, 2015), p. 108.
16. Alexandre Oliveira and Anne Gimeno, Executing the Supply Chain: Modeling Best-in-Class Processes and Performance Indicators (New York, NY: FT Press, 2014): p. 83.
17. Husam-Aldin N. Al-Malkawi Rekha Pillai, ‘The Impact of Financial Crisis on UAE Real Estate and Construction Sector: Analysis and Implications’, Humanomics, vol. 29, no. 2, 2013, pp. 115-135.