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GCC Quarterly Review - Q3 2022

Explore the recent developments
in the Gulf Cooperation Council (GCC)

Welcome to the Q3 edition of our GCC Quarterly Review

The third quarter of 2022 saw a number of legal developments in the Gulf Cooperation Council (GCC) region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates). The latest edition of our GCC Quarterly Review summarises a selection of the major developments in that period, with links to further reading where available.

A summary of the jurisdictions we cover in this edition

Click the buttons below to learn more on the legal developments


The ADGM Financial Services Regulatory Authority (“FSRA”) issued the “Guiding Principles for the Financial Services Regulatory Authority’s Approach to Virtual Asset Regulation and Supervision” on 12 September 2022. The Guiding Principles set out the FSRA’s high level approach to the regulation of virtual assets in ADGM, which is a complement to the framework for the regulation of virtual assets set out in the Financial Services and Markets Regulations 2015 and the FSRA’s Rulebook. The FSRA regulates virtual asset activities conducted in or from the ADGM, including those undertaken by multilateral trading facilities, brokers, custodians, asset managers and other intermediaries. The regime regulates virtual asset activities within existing categories of regulated activities, not as a separate category of activity.

The Guiding Principles address the FSRA’s risk appetite and priorities for the sector, with each principle covering one of the key pillars of ADGM’s holistic approach. The Guiding Principles are:

  1. a robust and transparent regulatory framework; 
  2. high standards for authorisation; 
  3. preventing money laundering and other financial crimes; 
  4. risk-sensitive supervision; enforcement powers for regulatory breaches; and 
  5. commitment to international cooperation.

The Guiding Principles are not legally binding.  

The FRSA was the first jurisdiction in the Middle East region to regulate virtual asset activities in 2018. Since 2018 the FSRA has issued a number of Financial Services Permissions, including to multilateral trading facilities and market intermediaries. Changes to the ADGM’s Virtual Asset regime are proposed, as set out in a public consultation in March 2022. The changes proposed would allow non-fungible tokens activities to be undertaken in certain circumstances and impose changes to the requirements on the use, sharing and reuse of public keys (read more here). 

The FSRA is proposing to formalise requirements for “Authorised Persons” offering over-the-counter leveraged products (“OTC Leveraged Products”) to retail clients. The proposed changes to the FSRA Rulebook (Conduct of Business Rules (COBS), the Prudential – Investment, Insurance Intermediation and Banking Rules (PRU) and fees (FEES)) are set out in Consultation Paper No.5 of 2022 - Proposals for Dealing in OTC Leveraged Products in Relation to Retail Clients. 

The proposed changes would streamline the current Financial Services Permissions conditions for such activity, and set out several new conditions, in a new chapter 23 of the COBS Module of the FSRA Rulebook. The additional provisions would:

  • define “OTC Leveraged Products” so as to clarify in scope instruments;
  • provide greater detail on margin close-out requirements for retail clients;
  • introduce a prohibition on referrals by unregulated persons (to reduce the risk of miss selling); and
  • prohibit funding account through a credit card or a third-party credit facility (to reinforce the appropriateness assessment for retail clients).

The conditions are stringent and aimed at providing robust protection for retail clients given the risks associated with such products.

The Dubai Financial Services Authority (“DFSA”) has adopted a new regime to regulate financial services activities in respect of Crypto Tokens in the DIFC, which is in force from 1 November 2022. Amendments have been made to the Regulatory Law and Markets Law, and certain modules of the DFSA Rulebook. The DFSA issued a Feedback Statement to Consultation Paper No.143 (read more) on 17 October 2022 to explain the final rules put in place following the consultation.

The regime regulates Crypto Tokens, being tokens which are used, or intended to be used, as a medium of exchange or for payment or investment purposes (or confer a right or interest in another token that meets these requirements). This would include cryptocurrencies and stablecoins. 

Financial Services and activities can be carried on in relation to Crypto Tokens that are “Recognised”, subject to compliance with relevant DFSA requirements. In order to be “Recognised”, Tokens must meet the DFSA’s criteria for recognition. The criteria are grouped into six main areas: regulatory status, transparency and public information, market depth, technological resilience, risks and controls. The DFSA intends to publish an initial list of Recognised Tokens. Going forwards, there is a formal recognition process for Tokens and the DFSA will publish notices when it recognises other Crypto Tokens. There is also a de-recognition process.

The scope of the current regime for certain types of financial services activities, including the trading and clearing of Investments, now extends to Crypto Tokens, subject to certain limitations. The regime applies the prohibition on financial promotions to persons making financial promotions in relation to Crypto Tokens. All entities intending to offer financial services in relation to Crypto Tokens need to establish a corporate entity in the DIFC under DIFC law, given the lack of international regulation and cross-border regulatory cooperation relating to Crypto Tokens. 

Carrying out Financial Services and activities in relation to “Prohibited” Tokens (referred to as Privacy Tokens or Algorithmic Tokens) is prohibited. Broadly, it is also prohibited to carry out Financial Services and activities in relation to “Unrecognised” Crypto Tokens (which have not been assessed and recognised by the DFSA) or “Derecognised” Crypto Tokens. Further, “Excluded” Tokens will largely fall outside the scope of regulation under the DFSA regime (such as Non-fungible Tokens and Utility Tokens that fall within the definitions in the DFSA Rules). Central Bank Digital Currencies (“CBDCs”) do not fall within the scope of the regime. This means that Authorised Firms and their clients will be able to use CBDCs, if and when created by any government and made available to the public.

The new Crypto Token regime forms the second phase of the DFSA’s digital asset regime, following the introduction of a regulatory regime for Investment Tokens in October 2021.

The DIFC Court has confirmed its jurisdiction to grant freezing orders in aid of non-DIFC proceedings in (1) William Allan Jones (2) Coffee Planet LLC (3) Coffee Planet Roastery FZE v Robert Anthony Jones [2022] DIFC CFI 043.

The proceedings involved an application to freeze assets in the DIFC and Dubai, for the purpose of supporting ongoing proceedings in onshore Dubai. The defendant argued that the DIFC Courts had no authority to issue interim injunctions in support of proceedings elsewhere where there were no assets within the DIFC. It was held that a DIFC Court has discretion to grant a freezing injunction in relation to assets within and outside the jurisdiction of the DIFC Court, whether or not there is a nexus to the DIFC and whether or not a judgment has been granted, without the need for the claimant to commence substantive proceedings or an action for recognition and enforcement in the DIFC. 

While there is no specific provision of DIFC law on freezing orders, the DFC Court identified the legal basis for its jurisdiction in the Judicial Authority Law (Dubai Law No.12 of 2004) and the DIFC Court Law (DIFC Law No.10 of 2014) (which provides for a general power to grant injunctive relief wherever it considers it appropriate to do so), and the Rules of the DIFC Court. The order of the DIFC Courts is in line with a number of previous decisions where the DIFC Courts have indicated that they had a freestanding jurisdiction to grant interim remedies in support of non-DIFC court proceedings. It also aligns with the approach of other major international dispute resolution centres.

The judgment notes that, in exercising its powers to grant injunctive relief, the DIFC Court did not “seek to usurp the powers of the Dubai Court, nor to compete with it, but to assist it by freezing assets against which its judgments might be enforced and which might otherwise be dissipated with the result of rendering the judgment ineffective”. The claimant would then need to apply to the onshore Dubai court seeking provisional attachment of the assets. 


The UAE Ministry of Justice (“MOJ”) has issued a letter to the Dubai Courts dated 13 September 2022 which confirms that English court judgments meet the grounds of reciprocity for enforcement in the onshore UAE Courts. The MOJ letter is not legally binding, but the Dubai Courts should take this into account when considering applications to recognise and enforce judgments issued by the English courts. The MOJ letter refers to the decision of the English High Court in Lenkor Energy Trading DMCC v Puri (2020) EWHC 75 (QB) in which it was determined that a Dubai court judgment was capable of being enforced. 

There is no treaty relating to the recognition and enforcement of court judgments in place between the UAE and the United Kingdom. Where there is no relevant treaty in place, the recognition and enforcement of foreign court judgments is governed by UAE law. This is regulated by UAE Cabinet Resolution No.57 of 2018 concerning the Executive Regulations of Federal Law No.11 of 1992, which amended the relevant provisions of the Civil Procedure Law (Federal Law No.11 of 1992). 

Reciprocity is required in order for the UAE Courts to enforce a foreign court judgment, in accordance with Cabinet Resolution No.57 of 2018. Other key conditions required to be satisfied include that the UAE Court did not have exclusive jurisdiction to try the dispute and the English court had jurisdiction in accordance with English law, the judgment is not inconsistent with any judgment made by a UAE Court and is not contrary to the morals or public order in the UAE, and certain procedural conditions. These conditions tend to be applied restrictively. While the UAE Ministry of Justice letter indicates that the UAE Courts should not cite a lack of reciprocity as a reason to refuse to enforce an English court judgment in future proceedings before them, the various other conditions must also be satisfied and so hurdles remain in the context of applications to enforce English judgments in the UAE Courts.  

The UAE Ministry of Justice letter to the Dubai court is a recent development and there is no published case law to date to indicate what approach the UAE Courts will take in relation to matters of reciprocity and the enforcement of English court judgments in future proceedings before them.

In July 2022, the Supreme Court of the UAE reportedly considered whether a bankruptcy decision in a foreign jurisdiction provides sufficient grounds for the UAE Ministry of Economy to de-register a company from the register of commercial agencies. Commercial agencies are regulated by the Commercial Agencies Law (Federal Law No.18 of 1981, as amended) and must be registered, and de-registered, by the Ministry of Economy. In this case, a UAE company was registered with the UAE Ministry of Economy as a commercial agent for three foreign companies as principals, one of which was liquidated and a request to de-register it from the register of commercial agencies was made. The liquidation order issued by the foreign court had not been recognised by the UAE Courts in proceedings. The Supreme Court held that a foreign judgment or order cannot be presented to the Ministry of Economy in support of an application to de-register a commercial agency in the UAE without first bringing proceedings in the UAE Courts to recognise the foreign liquidation order, and the UAE Courts having issued an execution order.

Lenders are entitled to receive interest on commercial loan transactions at the rate agreed between the parties in the facility agreement under UAE law, in accordance with the UAE Commercial Transactions Law (Federal Law No.18 of 1993). In the absence of an agreement between the parties as to the interest rate, a UAE Court has discretion to determine the applicable simple interest rate based on the prevailing market rate at the time of the transaction and judicial practice, subject to a statutory maximum of 12 per cent. per annum. 

Customary rates awarded by the courts in the different Emirates may be lower. Judicial practice in the Dubai courts is developing in this area. The General Assembly of the Dubai Court of Cassation decided unanimously that the applicable rate of interest to be applied by the courts of Dubai in the absence of an agreement should be 5 per cent. per annum, reduced from 9 per cent. per annum which was previously customary judicial practice (General Assembly Decision No. 1-2021 dated 9 July 2021). The General Assembly of the Dubai Court of Cassation noted in its decision that the prevailing interest rates of banks operating in the country

“Make it necessary to reconsider the rate of interest in order to adapt to the changing circumstances, provide market stimulation, and promote fair dealing at the individual and institutional levels”. 
Although not reported in any official publication, it should be noted that other courts in the UAE have reached similar decisions in recent proceedings before them and applied interest rates which are lower than previous customary judicial practice in such circumstances.  

Secured lenders may have greater confidence in the enforceability of security interests over membership interests (commonly referred to as “shares”) in UAE limited liability company (“LLC”), following a recent decision by the Dubai Courts. 

The express statutory right for partners in an LLC to pledge their shares is relatively new law, introduced in 2015 in reforms to the Commercial Companies Law (a position that is continued in the Commercial Companies Law 2021). Certain formalities are required in order for a partner to pledge their shares in an LLC, including obtaining approval for the pledge from the Dubai Economic Department (the “DED”) in the form of a “No Objection Certificate”, an announcement published in at least one Arabic daily newspaper, notification by to the other partners and executing a UAE law governed pledge before a notary. The LLC’s constitutional documents must include an express permission to pledge the partner’s shares in the company.

It is reported that the Dubai Courts made an enforcement order for the sale of pledged shares in an LLC, in a recent application before it. The application was commenced following a default under a financing arrangement provided by a bank, which was secured by a share pledge in favour of the bank over certain shares held by the security provider in an LLC, and perfected and registered with DED.

The Abu Dhabi Court of Cassation considered whether silence may constitute consent to an agreement to arbitrate in a recent case before it. Under UAE contract law, there is a general principle of deemed consent in circumstances where a person is required to respond to an offer within a specified time period and the person is silent, i.e., the person does not respond to either accept or reject a contractual offer within the required time period. The Abu Dhabi Cassation Court found that silence cannot be considered consent to an offer to enter into an arbitration agreement from the other party. In accordance with the Federal Arbitration Law (Federal Law No.6 of 2018), agreements to arbitrate must be in writing. Therefore, if the written agreement did not provide for arbitration, it cannot be not presumed that a party has agreed to arbitration on the basis of deemed consent. The case highlights the importance of including a mutually agreed, standalone arbitration agreement in contractual agreements.

The UAE Central Bank issued new guidance in August 2022 on anti-money laundering and combatting the financing of terrorism (AML/CFT) for its licensed banks financial institutions on the risks related to politically exposed persons (PEPs). The Guidance takes into account Financial Action Task Force (FATF) standards. The Guidance builds upon the AML/CFT obligations set out in Federal Decree Law No.20 of 2018 On Anti Money Laundering And Combatting The Financing Of Terrorism And Financing Of Illegal Organisations (as amended) and Cabinet Decision No.10 of 2019.

The Guidance requires banks and licensed financial institutions to:

  • develop risk-based policies to ensure they appropriately identify politically exposed persons (“PEPs”) or related customers prior to the commencement of the business relationship;
  • carry out specific due diligence on PEPs and their direct family members or close associates, in addition to the standard customer due diligence; 
    conduct on-going monitoring of the business relationships; and
  • demonstrate compliance on a monthly basis. Suspicious Transaction Reporting to the UAE Financial Intelligence Unit is required when a bank or licensed financial institution has reasonable grounds to suspect that a transaction, attempted transaction, or funds constitute the proceeds of crime, are related to a crime, or are intended to be used in a crime. 

The Dubai Virtual Assets Regulatory Authority (“VARA”), the central authority for the virtual asset industry in Dubai and the world’s first independent regulator for virtual assets, has issued new Regulations on the Marketing, Advertising and Promotion of Virtual Assets (the “Marketing Regulations”) (Administrative Order 1/2022, dated 18 August 2022). 

The Dubai Law No.4 of 2022 regulating Virtual Assets in Dubai, which was issued in March 2022, regulates virtual assets activities in Dubai and established VARA. Among VARA’s regulatory objectives is to develop the regulations, rules and standards required for regulating, supervising and overseeing virtual assets activities (including Virtual Asset Platforms, Virtual Asset Service Providers and all other matters related to Virtual Assets). 

The Marketing Regulations apply to both domestic and foreign entities in Dubai that cater for, or target, residents or customers in Dubai or the rest of the UAE in relation to virtual assets or virtual assets activities. Communications and advertisements (including publication of information across traditional and new-age multi-media channels) and activities held in Dubai to encourage market participation (such as customer engagement and investor solicitation), fall within the scope of the Marketing Regulations. However, the Marketing Regulations do not apply to marketing by an entity (i) that is not conducting virtual assets activity in Dubai, (ii) that originates outside the UAE, and (iii) that is not targeting any UAE residents does not have to comply with the Marketing Regulations. However, VARA will have the authority to act if it considers that any marketing activities pose a risk to its reputation, the Dubai’s or the UAE’s reputation. 

The issuance of any kind of virtual assets as part of marketing is classified as a regulated Virtual Asset activity. Entities that intend to conduct any form of within scope marketing activity must seek authorisation by VARA or provide a valid permit by a competent foreign authority and comply with the requirements set out in the Marketing Regulations. Among the requirements relating to virtual asset marketing activity are that it must be fair, clear, not misleading, and clearly identifiable as marketing or promotional in nature; include a prominent disclaimer that the value of the Virtual Asset is variable, cannot be guaranteed, and can be highly volatile, and not advocate that investments are safe or low risk, and not imply that past performance of investments is All other applicable laws, regulations, guidelines or other rules applicable in the UAE must also be complied with, including relating to marketing, data protection and consumer protection. Records of marketing content, audience details etc. must be kept for a minimum of two years. In a press release, VARA commented that

“These regulations specifically address marketing and communications activities, ahead of operationalising the MVP [Minimal Viable Product] licensees so that any mass-market information dissemination, and consumer solicitation are designed to safeguard community interests”.

Failure to comply with the regulatory guidelines could result in a cease-and-desist warning, fines ranging from AED 50,000 to AED 200,000, bans and/or revocation licenses and approvals.

Cabinet Resolution No.36 of 2022 Concerning Regulating Activity of the Crowdfunding Platform Operator applies all persons and procedures relating to crowdfunding in the UAE, including free zones. 

In order to operate a crowdfunding platform, an entity must obtain a licence from the Securities and Commodities Authority (“SCA”) An applicant for a crowdfunding platform operator licence must have minimum paid-up capital of 1 million UAE Dirhams.  A crowdfunding platform operator must comply with the obligations owed to investors, financing applicants and the SCA, in relation to matters such as disclosure, requirements as to financing applications, financial limits and education as set out in the Resolution. Certain entities are restricted from applying for crowdfunding through a platform including, joint stock companies, investment funds, entities that operate activities within the securities, insurance, or banking sectors, and companies that have a paid-up capital of more than 6 million UAE Dirhams.
In one the first disputes regarding transfer of cryptocurrency in the UAE, the Dubai Court of Cassation has recently considered the evidentiary standards required to demonstrate transfer and ownership of cryptocurrency assets. The Dubai Court of Cassation rejected a claim for the return of 608 Bitcoins by a transferor who had transferred the Bitcoin to the crypto wallet of an investment company, in accordance with the terms of an investment agreement between the transferor and transferee. In this case, the Dubai Court found that it was not enough to demonstrate that the transfer occurred, but the transferor also had to demonstrate that the receiving wallet actually belonged to/was owned by the transferee. Without the proof of a link between the transferee and the crypto wallet receiving payment, there was an insufficient nexus to rule in favour of the transferor. It is notable that the expert report filed by the transferor, which evidenced the validity of the transfer by referring to a blockchain records website and showing that the Bitcoins were held by a particular crypto wallet was insufficient. Further, the Court considered the crypto wallet identification number was insufficient evidence that the crypto wallet belonged to the defendant/investment company.

The Saudi Investment Promotion Authority (“SIPA”) was established by the Government of Saudi Arabia in August 2022, with a mandate to attract national and foreign investment as part of the National Investment Strategy (Shareek). Launched in October 2021, the National Investment Strategy seeks to encourage investment in the Kingdom’s Vision 2030 initiatives and accelerate the growth of the private sector (increasing contribution to GDP to 65 per cent by 2030) by providing investment and broad-based support across a number of pillars, ranging from financial to operational. The program will offer incentives and enable private investment of USD 1.33 trillion (SAR 5 trillion) through until 2030.
A new Telecommunications and Information Technology Law will broaden the scope of the existing regulatory framework to address emerging technologies and knowhow when it comes into force in December 2022. The new law, enacted by Royal Decree No M/106 dated 02/11/1443H (corresponding to 1 June 2022)), will repeal the current Telecommunications Law enacted by Royal Decree No. M/12 dated 12/03/1422H (4 June 2001). The Saudi Communications & Information Technology Commission (“CITC”) will remain the competent supervisory authority.

Key features of the new Telecommunications and Information Technology Law include:
  • licences are required for a greater range of activities, including not only for the provision of telecommunications services but also for using telecommunications networks for these purposes, providing infrastructure services and domain name services, providing specific communications or IT services including digital content platforms;
  • any material change of ownership of a licensee or authorised provider requires the prior approval of the CITC;
  • any mergers between service providers (in the Kingdom or abroad) or the acquisition of more than 5 per cent of the shares in a service provider in the Kingdom require the prior approval from the CITC;
  • provisions regarding compliance with reasonable requests for interconnection and access made by service providers;
  • provisions on the transfer of licenses, data protection, cybersecurity, anti-competitive practices and abuse of a dominant provision. 
Implementing regulations are expected to be issued shortly. Penalties for breach of the new law may include fines up to SAR 25 million, the suspension of services or take down of the digital content platform or licence suspension.
The Saudi Capital Market Authority (“CMA”) issued a new resolution approving the Instructions for Shariah Governance in Capital Market Institutions in July 2022, which set the rules and standards for Shariah governance in Capital Market Institutions that provide Shariah compliant services. 

Key provisions impose requirements for a Shariah Committee, a Shariah governance framework and internal audit process, policies and procedures for the development of Shariah compliant products and services, together with provisions to regulate the responsibilities of the Board of Directors and the executive management.

The Ministry of Energy, Industry and Mineral Resources (“MoE”) has issued for public consultation a draft law on Petrol and Petrochemical Materials. If enacted, it will replace the current Law on Trading Petroleum Products enacted by Royal Decree M/ 18 dated 28/ 01/ 1439 H (corresponding to 18 October 2017).

The draft law aims to regulate commercial activity related to trade in petrol and petrochemical operations:

  • Petrol operations are defined as using, purchasing, transporting, storing, importing, exporting, filling, treating petroleum products, or establishing or operating a refinery, terminal or distribution station.
  • Petrochemical operations are defined as producing, processing, selling, purchasing, distributing, transporting, storing, importing or exporting petrochemical materials, or operating a petrochemical plant.
The MoE is responsible for regulating and licensing such activity. Any person who carries out such activity without a licence may face penalties, including licence suspension for up to three years, a ban on licence renewal for up to five years, licence revocation, imprisonment and/or fine up to a maximum of SAR 30 million.

Regulators, investors and businesses in the Middle East are increasingly focussing on environmental, social and governance (“ESG”) issues, mirroring the global trend. ESG-led reforms focus on transparency, disclosures and reporting, corporate social responsibility and sustainable finance. Economic diversification strategies are having an unprecedented impact across sectors as the Gulf states transition from their historical reliance on hydrocarbons to becoming more balanced and sustainable economies focused on a greener future. Most states in the Middle East, including the UAE and Saudi Arabia, have committed to ambitious targets to reach net zero, in line with global expectations.

There is renewed focus on the Middle East to show leadership and initiative on climate issues, as the MENA region will host next two COP sessions. The 2022 United Nations Climate Change Conference, also known as COP27, will be hosted by Egypt from 6 to 18 November 2022. The UAE has been selected to host COP28 in 2023. 

With new challenges raised by the current geopolitical volatility, an increasing appreciation of the physical impacts of climate change and the energy crisis unfolding, eyes are on the COP27 summit from the business community, campaigners and the general public on how the world will transition to net zero. 

You can read more about global ESG developments in our Sustainable Futures blog. In a recent post, we look at COP27 - What to expect?

Find out more about COP27 in our dedicated COP27 microsite. The Linklaters ESG team will be following the negotiations closely and keeping you updated on what this means in practice for corporates and the financial sector across the globe.

You can find out more about ESG in the Middle East by listening to our new podcast series – #LetsTalkESG – which shares insights from a range of industry experts as they discuss the transition, governance, and sustainability of ESG principles in the region. Please click here to explore our podcast.

Tune into our first episode where Dubai energy & infrastructure managing associate Deepika Sriram speaks to Ibrahim Al-Zu’bi, Chief Sustainability Officer at Majid al Futtaim, Vice Chair of the United Nations Global Compact Network UAE and author of ‘How To Net Positive’. Ibrahim sheds light on the evolution of ESG in a post covid-19 era and shares strategies on how to embed ESG principles in corporate policies to generate long term value. 

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