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GCC Quarterly Review - Q2 2023

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

Welcome to the Q2 edition of our GCC Quarterly Review

The second quarter of 2023 saw a number of legal developments in the Gulf Cooperation Council (GCC) region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates). This 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


A new Sustainable Finance Regulatory Framework is now in force in the ADGM, enacted on 4 July 2023 following a consultation in late 2022. Integrating sustainability into regulatory frameworks is a strategic priority for the ADGM and the UAE, as the UAE gears up to host the 28th edition of the climate conference this year (COP28).

The framework has been implemented by way of amendments to the Companies Regulations 2020, the Financial Services and Markets Regulations, and the Conduct of Business (COBS), Funds (FUNDS), Markets (MKT) and Glossary (GLO) Rulebooks. 

Key features of the new regime are:

  • Green and Climate Transition Funds and Portfolios: the new regime comprises a comprehensive regulatory framework for “green” investment funds, for public funds that invest in verifiably green assets and an innovative framework for “climate transition” investment funds, for funds that invest in “greening” assets (i.e., assets that have the potential to become green). The regime provides for a green or climate transition taxonomy used to assess the eligibility of investments in the portfolio and third-party attestation for taxonomy-aligned investments. 
  • Green Bonds and Sukuks, Sustainability-linked Bonds and Sukuk: These categories of debt instruments will receive a designation, which should signal the issuer’s commitment to avoiding greenwashing and enhance the credibility and marketability of such instruments.  
  • ESG disclosures: A comprehensive environmental, social and governance (“ESG”) disclosures framework applies to listed companies, regulated financial services firms and large private commercial entities in the ADGM. In-scope entities will be required to make ESG disclosures on a “comply or explain” basis. The ADGM will consider moving to a mandatory disclosure requirement following a post-implementation review of the framework. The ADGM may also consider moving to International Sustainability Standards Board (“ISSB”) standards in due course.
    “Designation marks” will be used to demonstrate applicable products or services that purport to adhere to the requirements of the framework. The “designation mark” may be used in marketing materials and client communications and should provide investors with a level of confidence that those products and services purport to meet ADGM’s minimum standards.

You can read more about global ESG developments in our ESG Legal Outlook 2023 and our Sustainable Futures blog

You can find out more about ESG in the Middle East by listening to our 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.

The DIFC has consulted on amendments to DIFC Data Protection Regulations (the “Regulations”), in DIFC Consultation Paper No 2. of 2023. The proposals would amend the existing Regulations issued in 2020, pursuant to the DIFC Data Protection Law 2020 (DIFC Law No. 5 of 2020). 

The proposed amendments would address, among other things:

  • directions as to the actions and remedies required to report and manage personal data breaches, including in the case of inadvertently obtained information;
  • a clear framework for the lawful collection and use of personal data for use in electronic marketing or general outreach, and personal data and consent collection through website interfaces for the provision of various digital services, and protections for consumers; and
  • clarity and controls relating to personal data collection and use for processing in new ways, including via platforms built through digital enablement technology systems such as artificial intelligence.

New regulations have been issued by the UAE Securities and Commodities Authority (“SCA”), which provide a legal framework for carrying out securitisations in the UAE. 

SCA Resolution No. (22/RM) of 2023 on the Regulation of Securitisation (the “Securitisation Regulations”) regulate the issuance of “Securitised Financial Instruments”, which are described as negotiable securities issued and offered by a securitisation institution in a public or private manner where the value and return due are determined based on the relevant securitisation portfolio transferred to it. More specifically, Securitised Financial Instruments may be asset-backed securitised financial instruments, secured securitised financial instruments or asset-backed securitised financial instruments which are secured by mortgage over real estate.

The Securitisation Regulations apply to public and private joint stock companies whose shares are listed on a UAE stock exchange, or where the Securitised Financial Instruments are offered for public subscription in the UAE, or where the securitisation transaction is conducted through a securitisation entity regulated by the SCA. There are certain exemptions, such as for internal securitisation processes carried out by financial institutions licensed by the UAE Central Bank, or (in certain circumstances) by Federal or Emirate government institutions and bodies or companies wholly owned by them.

The financial assets that may form part of the securitisation portfolio are subject to detailed requirements. Among these requirements, the assets must be located in the UAE, arise out of the originator's main activity, generate measurable cashflows, must be legally owned by the originator and free from any encumbrances or rights of any other party.

Other provisions of the Securitisation Regulations address the sale of the securitised assets from the originator into the securitisation portfolio, and the bankruptcy remoteness of the issuer. 

The securitisation institution must apply to the SCA for initial approval for the securitisation. The Securitised Financial Instruments must be registered with the SCA, following which they may be listed and traded in accordance with the relevant laws and regulations.

The Securitisation Regulations have been anticipated following the issuance of the Commercial Companies Law No.32 of 2021, which recognised the concept of special purpose vehicles (SPVs), established with the aim of separating the obligations and assets associated with a particular financing transaction from the obligations and assets of its originator. The Commercial Companies Law anticipates that the SCA will issue regulations relating to the establishment and operations of SPVs. As far as we are aware, the SCA has not issued any SPV regulations yet. The issuance of the new regime may be a catalyst for more UAE companies to raise funding via securitisations, as an alternative to more traditional sources of financing. While the Securitisation Regulations look to offer clarity around matters around areas of legal uncertainty, it remains to be seen market participants, the SCA and the UAE Courts may assess the interplay of the new regime with existing laws and what approach they may take to structuring securitisation transactions in practice. The Securitisation Regulations were issued on 31 March 2023. 

The SCA has extended the transitional period for compliance with the new regime for the promotion or distribution of foreign funds in the UAE. The new regime, set out in SCA Decision No. 4/RM/2023 Concerning the Mechanisms of Regularisation of Status for Promotion of Foreign Fund Units and SCA Decision No. 02/RM/2023 which amended the SCA Rulebook, came into force in January 2023 (read more...).

The general rule is that only firms licensed by the SCA to conduct the regulated activity of “Promotion” may promote foreign funds to “Professional Investors” and “Counterparties” (as defined in the SCA Rulebook) in the UAE on a private placement basis, with SCA approval.  

All foreign funds to be distributed in the UAE must be registered with the SCA.

In limited circumstances, promoters of foreign funds may apply to the SCA to benefit from a transitional period allowing foreign funds to be promoted to retail investors in the UAE up to 31 March 2024 (extended from 30 June 2023) or the expiration of the relevant promotion agreement (whichever is earlier), provided that the foreign fund was registered with the SCA for retail promotion on or before 31 December 2022 and is subject to a valid promotion agreement (which would be breached if the promotion were required to cease in accordance with the new SCA rules). The promoter must provide the required supporting documentation with its application. Where agreements for promotion or distribution are often drafted so as to require the promoter to comply with local laws and regulations, and in such circumstances, the extended transitional period for compliance will not be available to promoters of foreign funds. Accordingly, the transitional period may be of limited application in practice. 

The UAE Central Bank has issued new “Guidance for Licensed Financial Institutions on Risks related to Virtual Assets and Virtual Asset Service Providers” to assist licensed financial institutions with understanding and complying with their statutory obligations when dealing in virtual assets or with virtual asset service providers (“VASPs”).

The Guidance focuses on compliance with anti-money laundering and counter terrorist financing (“AML/CTF”) obligations and should be read alongside the UAE’s existing AML/CTF framework applicable to VASPs.

The Guidance should assist licensed financial institutions to understand and assess the risks associated with virtual asset activity and doing business with VASPs (such as the risks of illicit activities, fewer consumer protections and greater risks of fraud or manipulation) and how financial institutions’ may potentially be exposed to virtual assets and VASPs through relationships or transactions (whether through direct services to VASP customers or indirect exposure through customers).

The Guidance addresses risk mitigation, including enhanced due diligence required on VASPs and VASP arrangements, including in relation to reputational checks, AML/CTF assessments and an understanding of third-party relationships associated with the VASP. The Guidance also flags the importance of financial institutions understanding the relevant regulatory framework applicable to virtual asset activities or VASPs; whether ADGM, DIFC or onshore UAE.

In an announcement made by the UAE Central Bank on 31 May 2023, the Guidance was expressed to come into effect within one month.
The Dubai Virtual Asset Regulatory Authority (“VARA”) issued the Transfer and Settlement Services Rulebook on 5 June 2023. It sets out the policies, procedures and public disclosures with which virtual asset service providers (“VASPs”) licensed by VARA to carry out virtual asset transfer and settlement services in and/or from the Emirate of Dubai must comply. 

VASPs must have internal policies outlining how they can rectify any erroneous virtual asset transmissions or transfers and, if required, provide refunds to customers. They must make detailed public disclosures on their websites on matters ranging from data privacy to client referral or introduction arrangements. In providing any transmission, transfer and/or settlement services, VASPs must comply with all legal and regulatory requirements for such services, inside and outside of the UAE, and ensure all such services are authorised by the client and all material risks have been disclosed to the client. The Rulebook also provides for the protection of client’s virtual assets, by restricting any disposals of such assets. 

VASPs must also comply with other VARA Rulebooks, comprising four Compulsory Rulebooks, seven Activity-Specific Rulebooks and Virtual Asset Issuance Rulebook (read more…).

Further, a new Grievance Committee has been established by VARA to hear grievances of market participants in the virtual asset sector in Dubai, pursuant to VARA Administrative Resolution No.1 of 2023, issued on 1 June 2023. The Resolution sets out the composition of the Committee, meeting and decision-making requirements. 

A landmark new law will regulate contractual relationships in Saudi Arabia, following the enactment if the Civil Transactions Law (Saudi Arabia Royal Decree No. M191/1444 H), issued on 18 June 2023 (corresponding to 29 Dhu Al-Qa'dah 1444 H) (Saudi Arabia Cabinet Decision No. 820/1444). It comes into force on 20 December 2023 (being 180 days from 23 June 2023, the date of publication in the Official Gazette), save where there is a conflict with another statutory provision. As it will have retrospective effect, contracts entered into before the law comes into force will need to be compliant and parties should be familiar with the new rules.

Saudi Arabian law is based on the principles of Islamic Shari’a. It is also derived from laws and regulations enacted and published by the Saudi Arabian Government, which the Saudi Arabian Courts are required to interpret and apply in accordance with Shari’a principles. The Civil Transactions Law is the first published law to set out a framework applicable to all types of contracts. In common with other Middle East civil law jurisdictions, Saudi Arabia’s codified contract law regime is heavily influenced by French, Roman, Egyptian, Jordanian and Islamic law. To date, contracts have been governed by and interpreted in accordance with Shari’a principles, with certain categories of contracts regulated by specific published laws. 

The new framework provides detailed regulations as to a range of matters generally applicable to all contracts, including contract formation, capacity to contract, contractual interpretation, termination, recission, mistake, termination, damages, right of third parties, assignments and transfers. Specific types of contract are also regulated, namely contracts of sale, loans, guarantees, leases, employment and other contracts for work, agency, partnership, Mudarabah and real estate contracts. 

The Civil Transactions Law effects specified amendments to other laws, to align with the Civil Transactions Law. For example, the definition of “Fixture” in the Moveable Assets Security Law (Royal Decree No. M/94 dated 15/08/1441H (corresponding to 8 April 2020 G)) will be replaced and certain provisions of the Civil Procedures Law will be repealed. Any conflicting provisions of Saudi Arabian laws conflicting with the Civil Transactions Law will be repealed when it comes into force. However, the Civil Transactions Law does not prejudice the application of any international treaties or agreements to which Saudi Arabia is a party.

The rules relating to foreign investment in securities have been consolidated and updated, pursuant to the new Rules for Foreign Investment in Securities issued by the Capital Market Authority (“CMA”) on 27 March 2023. 

The Rules consolidate, update and replace a number of previous rules on foreign investment in listed securities, which had restricted investment to those foreign investors who are: 

  • Foreign Strategic Investors (“FSIs”), according to the Instructions for the Foreign Strategic Investors’ Ownership in Listed Companies (which allowed a foreign investor to invest in listed companies shares); or 
  • Qualified Foreign Investors (“QFIs”), according to the Rules for Qualified Foreign Financial Institutions Investment in Listed Securities (which allowed a foreign investor to invest in all listed securities).

There is also a separate CMA Circular regarding permission for capital market agreements to enter into swap agreements. 

Applicable requirements for each category of investment are all set out in the Rules. The Rules also relax certain requirements in relation to each category of investment.

New regulations govern e-payment, e-money, e-payment service operations, and, for the first time, Buy Now Pay Later services. The Central Bank of Kuwait Resolution No. 45/471/2023, which repeals Resolution No. 44/430 of 2018, requires businesses engaged in such activities to obtain a licence and comply with a range of other obligations, such as corporate governance, risk management and data protection.

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