Monday 15, October 2018 by Kudakwashe

UAE issues federal law on netting


The law seeks to strengthen the legislative framework for the settlement of obligations arising from qualified financial contracts through set-off, offset, or net out obligations.

The UAE has issued a federal decretal law on netting, where its provisions shall apply to all qualified financial contracts and netting agreements specified under this law which are entered into by any person in the state, according to local newswire, WAM.

The law does not apply to financial free zones and financial institutions licenced thereby to the extent where there are similar legislations governing similar cases referred to in this law.

HH Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and the UAE Minister of Finance, said, "This law will be a new addition to the advanced financial legislative infrastructure in the UAE.”

Netting shall include cases of termination, liquidation and acceleration of any payment as well as obligation to deliver entitlement or obligation to make and receive or require payments under a qualified financial contract to which a netting agreement applies.

The law provides that during insolvency and bankruptcy proceedings relating to a netting agreement, the obligations of any party to make payments or deliveries as well as which are compatible to that agreement are converted into net claims or obligation in accordance with the terms of the applicable netting agreement. 

Additionally, the law also stipulates that the liability of a foreign party’s agency, in case of insolvency shall be calculated as of the date of the termination of the qualified financial contracts entered into under such netting agreement in accordance with the terms of this agreement.

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