In recent decades, the United Arab Emirates (UAE) has become notable across the world as a place for investing and doing business. In fact, the country ranks 23rd in the 2014 edition of the World Bank’s Doing Business report. Despite this strong standing, one of the few major disadvantages of doing business in the UAE has historically been the nation’s lack of a robust system for handling insolvency.
The Emirates introduced a system of bankruptcy laws in 1993. However, after two decades, these rules have been found to be unclear and therefore inadequate to resolve the complexities inherent in many insolvency cases. As a result, the UAE remains at the bottom of the Gulf Cooperation Council with respect to insolvency protection and ranks 101st in the same regard, according to the World Bank.
The last two years have seen a push to enact insolvency legislation in the UAE. After several months of proposals and revisions, the Ministry of Finance has submitted a new draft of such legislation for review by the Ministry of Justice. If approved, the rules would still have to go through a few more layers of vetting before being endorsed by the president’s office.
It is uncertain whether the new rules will take effect in the near future. However, the modernization of bankruptcy law is widely viewed as a key component of the continued growth of the UAE economy. The certainty that comes with the implementation of strong insolvency rules would further improve the country’s ability to attract foreign investors and raise its standing in the global economy.