The United Arab Emirates is a prestigious jurisdiction characterized by favorable business conditions. Businessmen and investors from all over the world consider starting a business in the UAE, since there are no taxes on income, personal income and dividends here. The number of licenses issued is growing every year. In the Emirates, small and medium-sized enterprises (SMEs) are the widest segment. Trade, tourism, consulting, auditors, marketing, IT, the service sector are the most popular areas, but today the conditions for doing business and opening a company in Dubai are so favorable that companies, from large to small, are opened every minute in all areas.
In one of our previous materials, we examined some aspects of doing business in the UAE, and also focused on conducting M&A transactions in the UAE. This article will continue the topic and will describe the legal options and remedies available to terminate a commercial contract in the Emirates, which should also be taken into account for businessmen who intend to conduct business in this country.
UAE Business Regulation
Federal Law No. 5 of 1985 in the Civil Code governs termination of contracts in the UAE. Section 267 states that parties may terminate an agreement in this way:
- By mutual agreement
Most contracts in the UAE refer to a termination clause in which contracting parties agree to terminate the contract when a specific event takes place (including violation of the terms of the contract). The Civil Code allows the parties in the Emirates to terminate the agreement by mutual agreement. However, it is worth considering that the parties should competently approach the issue of concluding a transaction and take into account the main provisions of the law. Specialists of IQ Decision UK will provide the necessary legal support in M&A transactions in the UAE (and other contracts) and will help to review agreements.
It is envisaged in the law that in case of non-fulfillment or violation of any clause of the contract, the party may terminate the contract without prior notice. Otherwise, notification is required.
Please note that the parties may terminate the contract unilaterally at their discretion, if the contract has a clear reservation.
- By court order
If the contract does not speak of termination, then you will have a dispute settled in the UAE.
If you are planning to start a business in the UAE soon, please note that the parties may seek termination when applying to the court or to arbitration.
- In accordance with the law
The law governing the contract should be taken into account when terminating the contract in the Emirates, depending on the type of contract. In the UAE, there are various types of agreements that, if terminated, should refer to specific laws.
Failure to fulfill the contract of one of the parties allows the other party to refuse to continue the contract. However, termination of the agreement in the UAE will not be fulfilled if the other party is ready to renew the agreement.
However, a party may initiate legal proceedings in the United Arab Emirates to terminate the contract due to non-fulfillment of contractual obligations. It is important to understand that any party considering legal remedies in accordance with the above provision should not suspend work without prior notice to the other party.
First time in the UAE
Doing business in the United Arab Emirates has its own specifics that you need to know before starting a business.
When establishing a company in this jurisdiction, you need to carefully consider how the structure of the company will build on. It makes sense to determine the countries of doing business, which will determine the most optimal legal form for the company.
If this is your first time in the country, you will need time to understand whether the partner you have chosen fulfills the promise of the contract, but it is better to hire a reliable legal consultant with significant experience in this jurisdiction. As a result, it will save time and money, and find the most profitable solutions in your situation.
Consulting a lawyer to revise or suspend agreements in the UAE will help you approach the termination of contracts competently so that lengthy litigation is avoided. To get legal advice on termination of contracts in the UAE, please contact IQ Decision UK staff by filling out the special form below or in any other convenient way.