Dubai International Financial Centre (DIFC) said on 14 March it had enacted amendments to the Employment Law, Trust Law, Foundations Law and Operating Law, following a period of public consultation in 2023.

The regulator said the legislative changes seek to ensure DIFC laws "remain in line with international best practice".

Amendments to the Operating Regulations also enhance the Registrar of Companies’ (RoC) powers to regulate entities that operate outside of standard business hours, it said.

Jacques Visser, chief legal officer at DIFC Authority, said: “DIFC’s world-class legal and regulatory framework is based on international standards and principles of common law. The latest legislative updates enacted by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister of the UAE and Ruler of Dubai, ensure the Centre’s laws continue to meet global best practice while catering to the unique needs of the region.

"At DIFC, we are committed to providing an optimal framework for financial services, innovative technology and related industries to grow and develop with legal certainty as an utmost priority.”

DIFC has made amendments to Part 10 of the existing Employment Law that will require DIFC employers to make “top-up” payments into a Qualifying Scheme (such as the DEWS Scheme) for their GCC national employees (in addition to making their GPSSA contributions) in circumstances where the amount of their GPSSA contributions are lower than what they would have received as monthly end-of-service contributions under the Employment Law if they were not GCC nationals.

Effectively, this levels the playing field for GCC nationals in DIFC that otherwise would have received less in the form of their monthly GPSSA benefits. This “top-up” requirement is, however, subject to a de minimis monthly threshold of AED 1,000.

Other amendments to the Employment Law deal with situations where a Qualifying Scheme is prohibited from accepting contributions from an Employer, or in respect of an Employee, as a result of sanctions prohibitions. The result of these amendments is that where an Employer or Employee is subject to sanctions that prohibit a Qualifying Scheme or its service providers to receive end-of-service contributions on behalf of an Employee, the Employer’s obligation to make such contribution on a monthly basis to a Qualifying Scheme is suspended and replaced with an obligation on the Employer to accrue such benefits on behalf of the relevant Employee/s until the sanctions related prohibition falls away or when an employment relationship is terminated, whichever is the earlier.

A series of changes to the Trust Law and Foundations Law relate to strengthening DIFC Courts’ jurisdiction over the administration of DIFC trusts and foundations, to the exclusion of foreign proceedings. In essence, these are what are known in the industry as firewall and ringfencing provisions to ensure that the provisions and requirements of DIFC Law in this regard are not circumvented by foreign courts or parties who do not want to submit to the jurisdiction of DIFC Courts in matters relating to DIFC trusts and foundations.

In addition, changes to the Foundations Law expand the role of Registered Agents, allowing them to enter into an arrangement with the RoC to fulfil certain compliance related duties on behalf of a Foundation (as already permitted for corporate service providers under DIFC’s Prescribed Company and Family Office regimes).

Amendments to the Operating Law relate to OECD requirements regarding record retention following the winding up of an entity and an update to the definition of “Privileged Communication”. The latter is now limited to communications emanating from the provision of professional legal advice or from the relationship of lawyer and client with the removal of the words “or other similar relationship” which was considered as too broad by the OECD.

Amendments have also recently been to the Operating Regulations to provide the ROC with specific powers to deal with Bars and Restaurants that operate at late hours and that may cause a nuisance to other DIFC tenants through noise or other anti-social behaviour.

The updates to the Laws came into effect on 8 March 2024, with the changes to Operating Regulations effective from 27 December 2023.

In a separate statement on 13 March, the DIFC said it had enacted the world’s first Digital Assets Law, a new law of security and related amendments to select existing legislation to cater for the consequences of the new digital assets regime and revised security regime.

The legislative enactments "aim to ensure DIFC Laws keep pace with the rapid developments in international trade and financial markets arising from technological developments, and to provide legal certainty for investors in, and users of, Digital Assets", it said.

Digital Assets Law – DIFC Law No. 2 of 2024

Digital Assets represent a trillion-dollar asset class and the scope for future innovation and market opportunities within it are considerable. Thus far, the primary focus in many jurisdictions has been to regulate and impose enforcement related sanctions on some of the practical applications of this asset class from a regulated financial services perspective. However, the fundamental benefits brought about by blockchain technology, the digital assets that can be created thereby, and their application across a wide spectrum of use cases will grow and become of increasing importance in a much wider context. In this regard, the broader legal questions as to the exact nature of the legal features and consequences of digital assets has very much remained open for debate on a number of key issues. International legal developments and judgments across the common law world have begun to provide some clarity in this regard but have not yet provided a comprehensive legal framework mapping out the full extent of the legal characteristics of a digital asset and how users and investors within this asset class may interact with digital assets and each other.

Following extensive review of the legal approaches taken to digital assets in multiple jurisdictions, and a period of public consultation in 2023, DIFC is now enacting its own Digital Assets Law.

Existing DIFC laws such as the Contracts Law, Law of Obligations, Law of Security, Law of Damages and Remedies, Trust Law and Foundations Law have also been updated through DIFC Amendment Law, No. 3 of 2024, to cater to specific issues arising in relation to this asset class.

Electronic Transferable Records

Updates to the Law of Obligations also provide for the use of electronic transferable records. Electronic transferable records are functionally equivalent to paper trade documents or instruments such as bills of lading, bills of exchange, promissory notes and warehouse receipts. Recognition of such documents in electronic form facilitates greater efficiencies within cross-border digital trade by increasing the speed and security of transmission of documentation and allowing for the automation of certain transactions through smart contracts.

Law of Security – DIFC Law No. 4 of 2024

Similarly, a great deal of innovation has taken place in secured transactions regimes internationally - particularly since the DIFC Law of Security was enacted in 2005. This includes the emergence of businesses and platforms that enable the extension of credit in, and secured or covered by, digital asset collateral arrangements, and an increasing drive to digitise international trade.

Following consideration of regimes in other jurisdictions and, in particular, UNCITRAL’s Model Law on Secured Transaction, in conjunction with the new Digital Assets Law, DIFC is repealing the 2005 Law of Security, and replacing it with a new Law of Security to significantly amend and enhance DIFC’s securities regime. This will align the regime with international best practice and provide clarity in relation to taking security over digital assets. In doing so, DIFC is also repealing the Financial Collateral Regulations, amalgamating the financial collateral provisions into a new chapter of the new Law of Security.

Jacques Visser, chief legal officer at DIFC Authority, said: “DIFC is excited to announce the enactment of its Digital Assets Law. We consider this legislation to be groundbreaking as the first legislative enactment to comprehensively set out the legal characteristics of digital assets as a matter of property law, and to provide for how digital assets may be controlled, transferred and dealt with by interested parties.

"At the same time, we are also enacting a new Law of Security, replacing the 2005 law. The revised regime is modelled on the UNCITRAL Model of Secured Transactions and significantly enhances DIFC’s securities regime to keep pace with international developments in this field and to ensure DIFC remains at the forefront of best practice.”

The new legislation came into effect on 8 March 2024.