The first Law Update of 2024 is here, and our first focus of the year spotlights Healthcare and Lifesciences, a sector that is undergoing significant growth and development across the MENA region.
Our focus provides an insight into some of the most important regulatory updates across the region, such as the UAE’s groundbreaking law on the use of human genome, Kuwait’s resolution on nuclear and radioactive materials, the new regulations for healthcare services in Qatar, Egypt’s healthcare regulatory framework, and the impact of the Saudi Civil Transactions Law on the healthcare and life sciences sector … and there is so much more!
Beyond the healthcare pages our lawyers share with you multi-sector insights where you will discover articles on Dubai’s DIFC regulatory framework for startups, Bahrain’s commercial agencies law, and we also shed light on Kuwaiti civil code and the advantages of setting up a joint stock company in Saudi Arabia.Read the full edition
Ayen Biar - Senior Associate - Litigation
Mustafa Ahmed - Associate - Banking and Finance
In this article, we consider the implications of this recent law which we consider will add value for lenders across the UAE, namely; Federal Law No. 20 of 2016 concerning the Mortgage of Moveable Assets to Secure a Debt (the “Law”). The Law was published in the Federal Gazette no. 609 dated 15 December 2016 and is due to come in effect 90 days after the publication (the “Effective Date”).
The Law is a welcome change as it provides lenders with the ability to register effective security over moveable assets, a problem both lenders and debtors have struggled with for some time. The Law applies to pledges over tangible or intangible moveable assets that exist at present or in the future. The Law does not apply to moveables for which existing laws already require registration or for which a special register already exists. For example, such as a pledge over shares registered with the Economic Department in an Emirate or a pledge over vehicles registered with the applicable traffic departments in each Emirate.
What are the main implications?
Prior to the Law, lenders relied on the provisions of the Civil Code to create a possessory pledge over moveable assets. Under the Civil Code, such a pledge over moveable assets was only valid if:
The Law has perhaps most significantly, changed this position by allowing a mortgage of moveable assets without the need to transfer the possession to the mortgagee or third party as bailee, if the mortgage is registered in the registry to be established under the Law (“Security Registry”) – see further below. Some other significant changes that the Law has introduced are:
Direct Enforcement (Out of Court)
The Law introduces another important process of enforcement – the right of self help. This allows the pledgee direct recourse against the pledged goods in certain limited circumstances. Article 27 and 28 of the Law specifies that limited circumstances in which such enforcement is possible.
In order to undertake direct enforcement against pledged assets generally, the pledge must notify all concerned parties (pledgor, the bank, the holder of bonds or documents subject of the pledge etc.). The Law does not give time limit for such notice; therefore (unless regulations specify otherwise), the parties are free to agree on a suitable period for the notice; unless expressly waived. Certain types of collateral have bespoke direct enforcement mechanisms.
The direct enforcement can be effected in respect of the following specific collateral as follows:
Type of Pledge
Means of Direct Enforcement
Moveable assets (generally)
By private sale, subject to prior agreement, notification to relevant parties and no other security interest existing.
Claims and Receivables.
Set off if the pledgee is a bank and by claim if the account is held at another bank.
Bonds and written instruments that are negotiable and transferable by way of delivery or endorsement.
Through delivery or endorsement if their value is equal to the right of pledge.
Written papers that are negotiable and transferable by way of delivery or endorsement if it is related to goods.
By application to the summary judge for the issuance of an urgent order.
Enforcement through the Court
The Law grants authority to summary judges to issue orders for enforcement of a registered pledge. In order to do so the pledgee must submit the following documents:
Process of Sale
In summary, the Law has introduced substantial and welcome changes in the market for secured lending while also providing lenders with better information on borrowers and providing them with greater comfort in taking security over moveable assets. Although there are many aspects of the implementation of the Law that remain uncertain at this point, one thing is abundantly certain – the Law is a welcome addition to the legal landscape of the UAE.w