This article on ‘Examining Competition and Bankruptcy Laws In UAE and Other Gulf Countries’ in written by an Intern at Legal Upanishad.
Introduction
Understanding the logic of both national and international competition regulations is a vital and smart component of any successful business model in the current market. Since competition laws regulate a wide variety of activities such as communication with competing companies, acquiring and sustaining a market dominance and operation in joint ventures, they may truly have a promising impact on every feature of a company’s business plans and operations. Consequently, any corporation considering to form a partnership in business or taking a different approach with its competitors must comply with the conditions given in the Competition laws.[1]
It is a complex undertaking to analyse and enforce competition law in developing nations like the Member States of the Gulf Cooperation Council (also referred to as GCC). Between 2004 and 2014, the countries that are the members of GCC which are Kuwait, the United Arab Emirates (UAE), Saudi Arabia (Saudi), Qatar, and Oman all enacted competition laws. The final country in the Gulf Cooperation Council (GCC) to adopt a competition law in the year 2018 is Bahrain.[2]
Meanwhile, a latest trend of restructuring legislative changes in the GCC has been propelled by the worldwide effects of the financial crisis, a drop in oil pricing, and an increasing awareness that bankruptcy and restructuring rules in the Middle East have not managed to keep up with the pace of changes in the economic environment. The UAE was the first member country which enacted a new bankruptcy law in 2016 followed by Bahrain enacting a new Reorganization and Bankruptcy Law and Saudi Arabia enacting new bankruptcy laws both in 2018. However, Kuwait, Qatar and Oman are yet to develop their reforms.[3]
Competition and Bankruptcy laws in UAE.
Competition Law in UAE
The United Arab Emirates (UAE) became the fourth Gulf Cooperation Council (GCC) country to pass competition law. One of the reasons competition law in UAE were passed to encourage international investors, who wanted assurances that they would be safeguarded from unjust and anti-competitive activities by local businesses. In 2012, the United Arab Emirates passed a Federal Law on Anticompetitive and Monopolistic Practices (referred to as the Anticompetitive Law). There are 33 articles in the law that regulates competition in all commercial domains. [4]
The Anticompetitive Law was enacted in 2013 and has been labeled “peculiar” because the lawmaker included an opening section describing the policy underlying the Competition Law in UAE, a strategy that may aid organizations involved in judicial review. [5]
The appropriate competition regulator in the nation is given for by a Committee constituted on the premise of the Competition Law in UAE and operating under the purview of the Ministry of Economy. The Committee was formed rather lately in 2018. The list of infringements on competitive disadvantage is quite extensive. The Cabinet within the Ministry of Commerce has discretionary authority in this area, notwithstanding the fact that the law does not specify a limit.
Bankruptcy Laws in UAE
In 2016, the revised Bankruptcy Laws in UAE No. 9 of 2016[6] went into effect, introducing the Financial Restructuring Committee’s capacity to oversee restructuring operations done by regulated financial institutions, along with other matters. The law mainly affects business entities, including financial companies, that are incorporated under UAE law, with the exception of corporations in the DIFC and ADGM. Preventive composition and bankruptcy are the two basic methods available to debtors in financial distress.[7]
Before the enactment of this new law, the laws concerning trader insolvency were included in Chapter V of UAE Federal Law Number 18 of 1993 prior to the adoption of the New Law (Commercial Transactions Law). Furthermore, the UAE Federal Law Number 3 of 1987 included comparable bankruptcy-related punitive clauses (UAE Penal Code). [8]
The amendments were intended to ensure the preservation of companies in economic distress while also tackling one of the main issues under the previous regime, namely strict criminal liability for issuers of bounced checks; however, they did not completely eliminate the risk of criminal liability in accordance with bankruptcy proceedings.[9]
Conclusion
It is commendable that recent advancements have benefited all GCC countries. They’ve all passed their own competition legislation now. Bahrain’s Competition Law should improve as a result of the country’s favorable economic growth. In terms of institutional architecture, Oman stands out due to the formation of a self governing Center for Competition Protection. Saudi Arabia has made progress in passing the second Law & laying the groundwork for stronger enforcement.
The unquestionable improvement of the trade and investment climate in Kuwait, the United Arab Emirates, and Qatar require a more competitive environment in order for customer welfare to become a critical priority. As a result, competition law is not a foreign concept anymore in the GCC. The writing phase of legislation in the gulf nations has come to an end, albeit slowly. The next logical step will be to improve the application, which is now deemed to be rather weak. A successful application could pave the way for the evolution of competition legislation in the Gulf Cooperation Council.
Meanwhile, the Bankruptcy laws in UAE are still in the development and massive changes have been witnessed in the nations. These laws are a major leap forward, and it is influenced by characteristics of other jurisdictions’ bankruptcy laws in UAE, as well as global bankruptcy law developments. The effectiveness of these laws is still in speculation and it is too soon to evaluate the success of these laws.
Reference List
[1] Casoria M., Competition Law in the GCC Countries: The Tale of a Blurry Enforcement, 3 Chinese Business Review 141, 141-149 (2017).
[2] Memeti N., Evolving Dynamics in Competition Law in UAE: A GCC Perspective, 19 Yearbook of Antitrust and Regulatory Studies 173, 173-198 (2019).
[3]Polina Lyadnova, Fatema Al-Arayedh, Maha Alali, Lucinda Smart & Mohamad Taha, Bankruptcy and Restructuring in the GCC: An Update on Recent Developments, EMERGING MARKETS RESTRUCTURING JOURNAL, https://www.clearygottlieb.com/-/media/files/emrj-materials/issue-9-2018/bankruptcy-and-restructuring-in-the-gcc–an-update-on-recent-developments-pdf.pdf.
[4] Nora, supra 2.
[5] Ibid.
[6] Federal Decree Law No. (9) of 2016 On Bankruptcy.
[7]Polina, supra 3.