The DIFC has announced that a new Law of Security is proposed that would repeal and replace the current Law of Security, DIFC Law No. 8 of 2005. It would also repeal the DIFC Financial Collateral Regulations 2019 and the DIFC Securities Regulations 2019 would be updated.
The new Law of Security would significantly amend and enhance the law concerning secured transactions in relation to movable assets in the DIFC, bringing the regime closer in line with aspects of international best practice. The proposed Law of Security is substantially based on the UNCITRAL published the Model Law on Secured Transactions (2016). It would also provide clarity in relation to innovative asset classes, such as digital assets.
Broadly, the new regime sets out general rules relating to “Security Rights” over “Movable Assets” generally, and certain specific rules for specific types of assets. Movable Assets comprise tangible and intangible assets (such as equipment, inventory, goods, receivables, financial collateral (including money deposited in bank accounts) and negotiable instruments. Aspects of the law also apply to fixtures within the jurisdiction of the DIFC. There are general rules and asset-specific rules relating to the effectiveness of Security Rights, priority, rights and obligations and enforcement. Generally, a Security Right will be effective against third parties if a Financing Statement is registered in the DIFC Security Registry and/or if the secured creditor is in possession of the asset. Existing provisions concerning the DIFC Security Registry, filing and registration are largely retained.
A transitional period of one year is proposed. This would mean that a prior Security Right that was made effective against third parties under the current Law of Security would remain effective against third parties for a specified transitional period after entry into force of the new Law of Security, even if the conditions for third-party effectiveness under the new law have not been satisfied.
The DIFC has also announced a proposed new Digital Assets Law. The proposed Digital Assets Law would regulate digital assets, such as cryptocurrencies, non-fungible tokens (NFT), stablecoins and security tokens, and seeks to provide a comprehensive framework in DIFC for digital assets.
The Law of Security – Consultation Paper No. 5 of 2023 and The Digital Assets Law – Consultation Paper No. 4 of 2023 have been posted for an extended 40-day public consultation period with the deadline for providing comments ending on 5 November 2023.
The Commissioner of Data Protection of the DIFC has issued the first adequacy decision regarding the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 which took effect on 1 January 2023 (“CCPA”). The adequacy decision establishes a determination of the CCPA’s equivalence with the Data Protection Law (DIFC Law No. 5 of 2020). The Commissioner recommends that the decision be reviewed annually.
A transfer of personal data to a recipient located in a jurisdiction outside the DIFC may take place only if that jurisdiction is deemed to have an adequate level of protection for personal data, in accordance with the DIFC Data Protection Law. The DIFC Commissioner of Data Protection applies adequacy standards based largely on prevailing international best practices. There are exceptions, including transfers supported by additional contractual clauses, certain internal data protection policies and processes or specific derogations in limited circumstances.
The adequacy decision facilitates personal data transfers between DIFC and California-based entities in accordance with the DIFC Data Protection Law, without having to apply additional contractual measures. The DIFC Commissioner’s Office recognises the CCPA and the California Privacy Protection Agency (CPPA) as an international organisation ensuring adequate data protection for purposes of personal data processed and transferred by the entities that it supervises. The onward transfer of personal information outside of California or the United States is not permitted.