Commercial Law in Dubai and the UAE: Driving a Growing Business Environment

Commercial Law in the United Arab Emirates (primarily based on Federal Law No. 18 of 1993 concerning Commercial Transactions Law, and its recent amendments, in addition to specific decrees and laws regarding companies like Federal Decree-Law No. 32 of 2021 on Commercial Companies) is the fundamental legal framework that regulates all commercial activities and relationships between merchants and companies in Dubai and all other Emirates. This law aims to provide an attractive, transparent, and regulated investment environment that supports the country’s accelerating economic growth.

Key Aspects Covered by Commercial Law:

• Definition of Merchant and Commercial Acts: The law defines who a “merchant” is (an individual or a company) and what constitutes “commercial acts” subject to its provisions, whether they are inherently commercial acts (like buying goods for resale) or accessory commercial acts (like contracts related to a commercial activity).

• Commercial Companies:

  • Company Formation: Commercial Law (especially the newer Commercial Companies Law) regulates the types of companies permitted in the UAE (such as Limited Liability Companies, Public Joint Stock Companies, One-Person Companies, Partnerships, etc.).
  • Formation Provisions: It sets out the conditions for formation, procedures, and legal requirements for each company type, including capital, commercial registry, and governance.
  • Shareholder Protection: It includes provisions to protect shareholder rights and regulates the relationship between partners, shareholders, and management.

• Commercial Contracts: The law regulates many contracts of a commercial nature, which differ in some of their provisions from civil contracts. These contracts include: commercial sale contracts, transportation contracts, commercial agency contracts (especially commission agency and commercial representation), commercial mortgage contracts, and current account contracts. It focuses on speed and trust in commercial transactions, and its provisions are often stricter in cases of breach.

• Commercial Papers: The law defines provisions related to cheques, promissory notes, and bills of exchange, which are essential financial instruments in commercial transactions. It regulates their creation, circulation, payment, and the legal procedures resulting from non-payment (although the criminalization related to bounced cheques has recently been amended to be largely a civil matter unless there is clear bad faith).

• Bankruptcy and Restructuring: Commercial Law (in addition to the Federal Bankruptcy Law) defines the procedures related to the bankruptcy of merchants and companies. It provides mechanisms for debt reorganization and restructuring of distressed companies, aiming to enable them to continue operating rather than immediate liquidation in some cases. It balances the protection of creditors’ rights with assisting debtors in times of financial difficulty.

• Industrial and Commercial Property (Part of the Broader Intellectual Property Law): It protects trademarks, trade data, trade names, and contracts related to industrial and commercial property, ensuring the protection of merchants’ rights and combating commercial fraud and unfair competition.

• Competition and Consumer Protection: The law includes principles aimed at promoting fair competition and preventing monopolistic practices. It also sets provisions for consumer protection in commercial transactions, despite the existence of separate and detailed consumer protection laws.

Its Importance for Dubai:

For Dubai, Commercial Law plays a vital role in:

• Attracting Foreign Investments: By providing a clear, stable, and updated legal environment.
• Market Regulation: Ensuring fairness and transparency in transactions between companies.
• Supporting Entrepreneurship: By defining company types and formation procedures, making it easier for individuals and businesses to start their operations.
• Dispute Resolution: Providing clear mechanisms for resolving commercial disputes, whether through courts or arbitration.

Commercial Law in the UAE, especially in Dubai, is continuously evolving to keep pace with global economic changes and the requirements of the modern business environment, making it an essential element for the success of any commercial venture in the Emirate.