This article was written and assisted by Jude Senanayake and Rayan Bagundang, Paralegals
DIFC Amendment Law No. 3 of 2024
This law came to effect on March 2024 and amends provisions in DIFC Laws.
For the purposes of this note, we consider the amendments to the Law of Damages and Remedies DIFC Law. No 7 of 2005 (“Law of Damages and Remedies”) and the Law of Obligations DIFC Law No. 5 of 2005 (“Law of Obligations”).
Amendments to the DIFC Law of Damages and Remedies
Additions have been added to Article 35 of the Law of Damages and Remedies, which deals with orders the court may impose. These additions include: (a) recission; and (b) rectification, and orders can be made without prejudice to rights contained in the relevant laws of the DIFC with respect to setting aside or avoiding a transaction or gift.
- Recission
An order of recission allows the court to order that the transaction or gift be repelled with the aim to restore the parties to their original positions before the gift or transaction has been made on the following basis: (i) mistake; fraud; threat; misrepresentation; or breach of fiduciary of no-conflict and no profit rules under the relevant laws.
The law provides that recission may be refused on the following basis: (i) affirmation of the transaction or gift by the counterparty; (ii) undue delay; (iii) prejudice to third party rights; or (iv) it is impractical to restore the parties as close to reasonable possible to their state before the transaction or gift.
- Rectification
Rectification is a court order that a contract be rectified for it to reflect what the intended agreement of the parties was meant to be. This occurs when there has been a common mistake or a unilateral mistake during the time the contract was formed.
A common mistake under this law is where: (i) the parties had a common intention whether or not amounting to an agreement in regard to a particular matter under the contract; (ii) there was an outward expression of accord; (iii) when the contract has been executed, the intention continued; and (iv) the contract did not reflect the common intention of the parties with the parties neglecting to have the contract reflect their common intention, as provided under Article 41 B (1) and (2) of DIFC Law No. 7 of 2005.
A unilateral mistake under this law is where when one party (Party A) mistakenly believes that a contract contained or did not contain a provision, and the other party (Party B) is aware of the mistake, but willfully or recklessly fails to draw the attention of Party A to the mistake for Party B’s own benefit as provided under Article 41 B (3) of DIFC Law No. 7 of 2005.
Rectification may only be refused: (i) where it would substantially prejudice a non-party to the contract; (ii) there has been an unreasonable delay in pursuing the remedy; or (iii) the court finds that it is inequitable to award rectification.
- Agreed Sum
In addition, the law provides that a party (Party A) may bring an action under the contract for an agreed sum; however, the only times they are barred from doing so are where: (i) there is anticipatory non-performance by the contractual counterparty (Party B) under the relevant law; and (ii) Party A has no legitimate interest in fulfilling their obligations under the contract due to the anticipatory non-performance from Party B as provided under Article 41 C of DIFC Law No. 7 of 2005.
Further, a party who brings an action for an agreed sum is not required to prove that loss has occurred and has no duty to mitigate its loss.
Amendments to the DIFC Law of Obligations
- Introduction of Digital Assets Law
The introduction of the Digital Assets Law provided new rights and definitions to reflect the establishment of the Digital Assets Law.
It introduced electronic trade documents as valid forms of negotiable instruments, which means that any document may be approved or accepted in writing via in a tangible form or in the form of an electronic document.
- Electronic Trade Document (“ETD”)
Under the Law of Obligation, ETDs are included and defined as information contained in a document that is electronic. The purpose of ETD are: (i) to identify a document so that it can be distinguishable from copies; (ii) to protect the document against any unauthorized alteration;(iii) to allow a person to have secure control over the document; and (iii) to indicate the time or place in respect of the document as permitted under the governing law of the document.
DIFC Amendment Law No. 1 of 2024
This law came into effect on March 2024 and amends several provisions in DIFC Laws and we consider amendments to DIFC Law No.2 of 2019 (the “Employment Law”) and the DIFC Law No. 7 of 2018 (the “Operating Law”).
DIFC Amendments to the DIFC Employment Law
Amendments to the Employment Law have been made to address: (i) issues regarding pensions for UAE and GCC Nationals, and (ii) sanctioned persons employed in the DIFC.
UAE and GCC nationals having been registered with the GPSSA were facing issues with not been registered into the DEWs system. For example, individuals receiving amounts under a statutory cap were receiving contributions significantly less than those non-UAE and GCC Nationals who were registered under the DEWs system.
As such, Article 65(3) now provides that where the individuals whose pension contribution is less than the amount of the core benefit would have been if they were not a UAE or GCC national, any such employee will be entitled to a top up to make up for the difference between the GPSSA amount and the amount they would have received had they been registered to the DEWs and provided that the monthly top up obligation for each employee is equal to or greater than AED 1,000 as provided under Article 65 (3) of DIFC Law No. 2 of 2019.
Further the amendments to the DIFC Employment Law deal with sanctioned persons which are defined as “an individual, entity, body or organisation listed on a sanctions list issued and passed by the United Nations Security Council, any consolidated list of financial sanctions issued by the Federal Cabinet of the UAE or any other sanctions that may apply to a Qualifying Scheme or its trustee or administrator.”
As such, where the Employee or Employer becomes a sanctioned person, the Employers are required to accumulate the amounts under the gratuity until the person is: (i) no longer deemed a sanctioned person; or (ii) when the Employee’s termination date ends. The Employer is not responsible for any losses incurred during the period of accumulation.
If you have any questions and/or queries in relation to the amendments please do not hesitate to reach out to a member of our team.
