The United Arab Emirates – Seeking Remedies for Financial Crime

Fraud and matters involving asset tracing very often have a cross-border, international flavour to them, and in order to pursue such claims effectively and maximise the chances of making a recovery, it is important to have a clear strategy from the outset which can be implemented quickly and efficiently.

Challenges can, however, arise when a wronged party has to navigate through the complexities and peculiarities of different jurisdictions and the specific tools available to them in each, which are often not universal.

This article is explores the position in the United Arab Emirates in detail and is part of a series of articles considering the frameworks and toolboxes available to wronged parties in UAE, France and Switzerland, which each play a prominent role in international finance, business and commerce.

Legal framework

The UAE is a federation of seven Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah (RAK), Sharjah and Umm Al Quwain). The UAE’s legal system is an intricate web where civil and common law co-exist, and the interplay between Federal and Emirate level laws must be considered including, in the latter respect, in respect of the various laws that are bespoke to the multiple free zones that exist within each Emirate. UAE Federal Law is a civil law system that incorporates elements of Egyptian and French civil law, as well as principles of Islamic Sharia and it applies across all seven Emirates. However, each of the seven Emirates is also entitled to choose to maintain their own separate local courts to deal with matters that are not reserved to federal jurisdiction in the UAE’s Constitution. Abu Dhabi, Dubai and RAK maintain their own independent judiciaries which apply civil law and Sharia principles, whereas the other Emirates’ judicial systems are part of the Federal judicial system. These jurisdictions are typically referred to as “onshore UAE”. Criminal matters are instead dealt with at a federal level.

The UAE Constitution also provides for the establishment of free zones, including a specific subset of free zones called “Financial Free Zones” of which there are currently two in the UAE: the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). These Financial Free Zones are exempt from all federal civil and commercial laws, but federal criminal laws nevertheless continue to apply. Both the DIFC and ADGM operate their own independent common law court systems, with the DIFC’s court rules closely modelled on the English Civil Procedure Rules. Both the DIFC and ADGM give significant weight to English common law principles and precedents, as well as the typical common law tools which can be deployed to pursue fraud and asset tracing cases.

The complexities of the UAE’s legal framework can at times present challenges to parties pursuing their claim but at the same time also provide a wider array of tools and options to parties since civil and criminal statutes and measures often overlap and can also be used in conjunction with each other in parallel proceedings. The UAE is becoming increasingly plugged in to the international frameworks for judicial co-operation and cross-border dispute resolution and significant progress has been made with greater reciprocity of enforcement between the UAE courts and foreign jurisdictions, the development of the UAE’s extradition processes and its participation in INTERPOL’s “Red Notice” system.

Civil and criminal proceedings in UAE onshore jurisdictions

The two primary pieces of onshore legislation which criminalise various fraud-related offences are the Federal Law No. 31 of 2021 on the Issuance of the Crimes and Penalties Law (referred to as the “Penal Code”) and Federal Law No. 34 of 2021 concerning the Fight Against Rumours and Cybercrime (referred to as the “Cybercrime Law”).

Civil claims are usually brought under the general provisions of Federal Law No. 5 of 1985 on the Civil Transactions Law of the United Arab Emirates (as amended) (referred to as the “Civil Code”) and, in particular, pursuant to Articles 282 onwards which provide that any harm or tort committed on someone shall render the actor liable to compensate the victim. Alternatively, victims of fraud may elect to pursue a claim for unjust enrichment or unjust expropriation which are found in Book 1, Part 4 (Acts conferring a benefit) of the Civil Code, and which separately provide for restitution and compensation.

Criminal and civil proceedings in parallel

Both the Penal Code and Federal Law No. 38 of 2022 on the Issuance of the Criminal Procedure Law (referred to as the “Criminal Procedure Code”) provide a framework for the interplay between civil and criminal proceedings in the UAE. For example:

• The Criminal Procedure Code allows for a civil lawsuit which arises from the facts of a criminal case to be filed before the criminal court in certain circumstances, and later referred, if necessary, to the civil courts by the criminal court (Articles 23 and 27). The criminal court may award civil damages to a victim, although in practice, the criminal court will typically refer the matter back to the civil courts.
• The Penal Code provides that there are no time limitations for civil actions arising from or connected to fraud or bribery offences (Articles 270 and 286);
• There is provision (in Article 23(2)) for victims of fraud to apply for a temporary award of damages from the criminal court pending resolution of a civil claim against the defendant.
• Under Dubai Law No. 37 of 2009 on the Procedures for the Recovery of Public Property and Illicitly Collected Money, a penalty of imprisonment for up to 20 years can be imposed on convicted persons who refuse to return the proceeds of their crime derived from offences committed in Dubai.
• Under Law No. 37, victims of fraud are also given standing to seek restitution of the proceeds of crime, which applies to both public and private funds.

Whilst victims of fraud in the UAE have the option of pursuing both civil and criminal claims concurrently, both under the law (Article 29 of the Criminal Procedure Code) and in practice, any civil claim will be stayed pending the outcome of the criminal action and the criminal conviction is typically used as the basis for substantiating the civil claim. In such circumstances, the onshore civil courts are empowered to grant an array of interim remedies to preserve the position of the parties in the civil claim pending the outcome of the criminal proceedings. Such interim remedies include precautionary attachments, which are equivalent to freezing orders issued by common law courts, and travel bans.

Civil and criminal proceedings in DIFC and ADGM “offshore” jurisdictions

Various common law tort-based claims can be brought in the DIFC and ADGM offshore jurisdictions, such as claims for deceit, unlawful and lawful means conspiracy, inducing breach of contract, unlawful interference and malicious falsehood. Alternatively, equitable claims can be brought which primarily concern causes of action related to trusts, such as breach of trust, breach of fiduciary duties, knowing receipt, and dishonest assistance.

The DIFC and ADGM courts are able to deploy the full spectrum of interim measures which are typically available in common law jurisdictions, such as freezing orders (known as Mareva injunctions) and other injunctive orders, possession orders (known as Anton Piller orders) and disclosure orders against unrelated third parties (known as Norwich Pharmacal orders) and Bankers Trust orders which require banks to disclose information concerning third party bank accounts to allow victims to trace money. In theory, such interim measures can be enforced outside of the territory of the relevant free zone but some uncertainty remains as to how this would work in practice where the interim measure may not exist or be recognised in the onshore jurisdictions.

Neither the DIFC nor ADGM courts have their own separate criminal law regimes and both jurisdictions are subject to the UAE’s federal criminal laws, as outlined above. Therefore the notion of a criminal judgment being used to substantiate a civil claim does not exist in the DIFC and ADGM offshore jurisdictions in the same way that it does in the onshore jurisdictions.

Conclusion

Navigating the court systems of the UAE to pursue claims requires a nuanced understanding of its dual legal system, encompassing both civil and common law elements, as well as federal and Emirate-specific regulations. The UAE offers civil and criminal remedies that can be pursued concurrently, providing a comprehensive toolkit for wronged parties. By leveraging the interplay between civil and criminal proceedings, and utilising the robust interim measures available in both onshore and offshore jurisdictions, claimants can effectively trace and recover assets. As the UAE continues to enhance its judicial cooperation and cross-border dispute resolution mechanisms, it stands as a pivotal jurisdiction for addressing financial crime on an international scale. For those seeking to navigate this complex legal environment, professional legal guidance is indispensable to ensure a strategic and effective approach to asset recovery.

Our expertise

With offices in many of the world’s major financial centres, including London, Paris, Geneva, Zurich, Dubai, Hong Kong and Singapore, we are ideally placed to work with you to prevent, resolve and assist with financial crime disputes and investigations as they arise, whatever the law, language, rules, industry sector, or subject matter of that dispute may be. Our dedicated multicultural and multilingual specialists conduct proceedings under both common law and civil systems and regularly act in fraud-related proceedings.

Whether you are an individual or a business, our strategically focused specialists will work alongside you through every aspect of any proceedings. Please contact the author or your usual Charles Russell Speechly contact if you would like to get in touch.

Frequently Asked Questions

In the UAE, can civil remedies be sought within criminal proceedings?

The Criminal Procedure Code allows for a civil lawsuit which arises from the facts of a criminal case to be filed before the criminal court in certain circumstances, and later referred, if necessary, to the civil courts by the criminal court (Articles 23 and 27).  The criminal court may award civil damages to a victim, although in practice, the criminal court will typically refer the matter back to the civil courts.

In the UAE, can civil and criminal proceedings be brought at the same time?

Yes. Victims of fraud in the UAE have the option of pursuing both civil and criminal claims concurrently (Article 29 of the Criminal Procedure Code). However, usually a civil claim will be stayed pending the outcome of the criminal action. This means that usually a criminal conviction is used to substantiate the civil claim.

In the UAE, what are the time limits, or what is the limitation period, for bringing a fraud claim?

There are no time limitations for civil actions which arise from fraud or bribery offences (Articles 270 and 286 of the Penal Code).

In the UAE, what interim remedies are available for a civil claim pending the outcome of a criminal claim?

Onshore civil courts can impose an array of interim remedies to preserve the position of parties in a civil claim pending the outcome of a related criminal case. These measures include precautionary attachments and travel bans for on the defendant.

In the ‘offshore’ jurisdictions, the DIFC and ADGM courts can issue common law interim measures such as freezing orders (known as Mareva injunctions), injunctions, possession orders (known as Anton Piller orders) and various third-party disclosure orders.