The Legal Structure in the UAE

The United Arab Emirates ("UAE") is a Federation established in 1971 in the area previously
known as the Trucial Coast in the Arabian Gulf. Seven Emirates, namely:

Abu Dhabi, Dubai, Sharjah, Ras Al Khaimah, Umm Al Quwain, Ajman and Fujairah.

These formed the Federation. In establishing the UAE, the Rulers of the seven Emirates agreed a
Provisional Constitution ("the Constitution"), which provided the legal framework for the
Federation. The Constitution provided for the establishment of the Supreme Council of the Rulers
of all the Emirates as the foremost authority in the Federation and a Council of Ministers as the
Executive Branch of the Federation. Federal Ministries of Foreign Affairs, Defence, Justice, Public
Health, Communications, Information, Interior, Finance and Industry, Economy and Commerce,
Education, Public Works, Agriculture, Labour and Social Affairs and Planning were established.

As a Muslim country, one of the fundamental principles enshrined in the Constitution provides
that Islamic Law (Sharia) is the main source for legislation in the UAE. The Federal Government
is entrusted with the task of promulgating legislation concerning and regulating the principal and
central aspects of the Federation. These include foreign affairs, defence, security, the federal
judicial system, federal finance and loans, postal and communication services, federal public
works, civil aviation, education, public health, currency, electricity services, nationality and related
matters, management of federal possessions, census and federal information.

The Constitution further emphasises that Federal Laws are to be promulgated to regulate labour
and social services, real estate and its expropriation in the public interest, agriculture and animal
wealth, substantive civil and criminal legislation, company laws, laws of procedure, protection of
intellectual property, aviation, delineation of waters and regulation of shipping on the high seas.
Another constitutional principle adopted by the Federation in accordance with the provisions of
the Constitution was that whilst jurisdiction for promulgating substantive legislation was confined
to the Federal Government, the local governments of the seven Emirates were authorised to
regulate local matters that were not confined to the Federal Government.

Prior to the establishment of the UAE each of the seven Emirates regulated its own affairs by
passing local laws and regulations, including legislation establishing and regulating a judicial
system. For example the Emirate of Abu Dhabi promulgated a Law in 1968 establishing and
regulating the Abu Dhabi Courts. It also promulgated the Law of Procedure at the Civil Courts No.
(3) of 1970, and the Law of Procedure at the Criminal Courts of 1970. Dubai promulgated a Law
establishing its Courts in 1970 and Fujairah followed suit in 1969. Ajman, Sharjah, Ras Al
Khaimah and Umm Al Quwain established their Courts by Laws passed in 1971. Some of the
local laws that were promulgated prior to the Federation still prevail today and will continue to be
applicable unless and until they are repealed by Federal Legislation.

One of the main features of the Federation is the establishment of a Federal judicial system. At
the pinnacle of this system, the Constitution provided for the establishment of a Federal Supreme
Court (colloquially referred to as the "Court of Cassation") as the highest judicial authority in the
land and specified its functions and operations. Subsequently Federal Laws were promulgated
detailing the functions and operations of the Federal Supreme Court. The constitution further
provided for the establishment of lower Federal Courts.

The Federal Supreme Court, which should be based in the Federal Capital of the UAE, is head
quartered in the city of Abu Dhabi. Initially, there was some doubt as to the legal basis of
establishing a Federal Court of Appeal. This was later clarified by a decision of the Federal
Supreme Court interpreting the relevant provisions of the Constitution as allowing the
establishment of such Courts of Appeal. Thus, the UAE Federal judicial system consists of three
stages of litigation in both Civil and Criminal Courts, namely, Courts of First Instance, Courts of
Appeal and the Federal Supreme Court.

In accordance with the Constitution, each of the seven Emirates retained the right to choose
either to participate in the Federal Legal System or to maintain its own legal system. Four
Emirates, namely, Abu Dhabi, Sharjah, Ajman and Fujairah, opted to incorporate their judicial
systems into the Federal system. The Emirate of Umm Al Quwain initially opted to retain its
independent system but in 1991 opted to join the Federal judicial system. Dubai and Ras Al
Khaimah maintain their own independent systems. These Emirates initially based their judicial
systems on two stages of litigation. The Emirate of Dubai later established a Court of Cassation in
addition to its Courts of First Instance and Appeal. Although Dubai still retains its judicial system it
has decided that the Federal Civil Procedures Law No. (11) of 1992 shall be applied in its Civil
Courts.

Historically the legal systems of the Middle Eastern Islamic Arab countries were based on Islamic
Law (Sharia). Sharia (religious) Courts formed the judicial cornerstone of these countries. The
modernisation of the majority of the legal systems in these countries at the beginning of the
twentieth century, led to the establishment of Civil Courts which were generally granted the
competence to review civil transactions as well as commercial and other types of disputes.
Separate Criminal Courts were also established. Matters of personal status such as marriage,
divorce, custody and inheritance remained with the Sharia Courts whose judges were trained in
Islamic Law and Jurisprudence. Some Islamic Arab countries such as the Kingdom of Saudi
Arabia maintained their legal systems which were, and still are, based on Islamic Law. Their
judiciary is organised on the basis of the Sharia Courts.

In the UAE the establishment of the Civil and Criminal Courts resulted in diminishing the role of
the Sharia Courts. Nevertheless, the competence of the Sharia Courts in some Emirates,
particularly Abu Dhabi, was substantially expanded later on to include, in addition to matters of
personal status, all types of civil and commercial disputes as well as serious criminal offences.
Therefore, in addition to the Civil Courts, each of the seven Emirates maintains a parallel system
of Sharia Courts which are organised and supervised locally.

In the comparatively short period since its establishment, the UAE has made important strides in
regulating some of the vital legal aspects of its rapidly expanding economy. The Labour Law No.
(8) of 1980, the Agency Law No. (18) of 1981, the Maritime Law No. (26) of 1981, Commercial
Companies Law No. (8) of 1984 ("the Company Law") which will be discussed in this book,
Insurance Law No. (9) of 1984, Civil Transactions Law No. (5) of 1985 ("the Civil Code") and the
Penal Code Law No. (3) of 1987 were promulgated.

In the past few years several other very important laws were also promulgated such as the Penal
Code Law No. (3) of 1987, the Law of Criminal Procedure Law No. (35) of 1992, Law of Evidence
(Proof) in Civil and Commercial Transactions No. (10) of 1992, the Civil Procedure at the Federal
Courts Law No. (11) of 1992, the Trade Marks Law No. (37) of 1992, the Law for the Protection of
Intellectual Property and Author's Rights No. (40) of 1992, the Regulation and Protection of
Industrial Property of Patents, Drawings and Industrial Designs Law No. (44) of 1992 and the
Commercial Transactions Law No. (18) of 1993.

In countries that had opted for the adoption of codified civil laws rather than a legal system similar
to the Common Law system which is generally based on judicial precedents, legislation plays an
extremely important role. In a jurisdiction, such as the UAE, which constitutionally adopted Islamic
Law (Sharia) as its main source of legislation and whose legal system is generally based thereon,
the significance of the aforementioned progress in legislation is further emphasised. This is
mainly due to two interrelated well established principles of Islamic law, namely:
Discretionary interpretation is not allowed in matters covered by specific legislation.
In the absence of a specific law, courts applying Islamic Law are obliged to adopt the general
principles of Islamic jurisprudence and justice. In applying these general principles, a judge is not
bound by the decisions rendered by other judges, nor is he bound by his own previous decisions.
Precedents in Islamic Law are not considered binding and do not form part of the legislative
process.

These legal principles were confirmed in Majalat Al-Ahkam Al-Adlia ("Al Majala"), the Civil Code
of the Ottoman State which was based on Islamic Law. Al Majala was derived mainly from the
Hanfi Sect, compiled by jurists and promulgated in Istanbul in 1286 H (i.e. 1836 ). It was applied
in most Arab countries that were under the Ottoman rule until the First World War. After their
independence these countries continued to apply Al Majala, until they promulgated their own civil
codes. Al Majala is still considered an extremely important reference in Islamic Law. The principle
of precedents was dealt with in Al Majala where it was provided that 'an opinion cannot be refuted
by another' which is explained therein to mean that each case should be judged on its own
merits.

Although, as indicated earlier, the Constitution stipulated that Islamic Law (Sharia) is a main
source of legislation in the UAE, it nevertheless provided that decisions of the Federal Supreme
Court are binding on all concerned. Consequently, although the decisions of the Federal
Supreme Court are not considered to form a part of the legislative process they are extremely
important, and definitely serve as an indicator to the Law and its interpretations in this jurisdiction.
A practical difficulty though can arise in ascertaining the decisions of the Federal Supreme Court
and other Appeal Courts: although the Federal Ministry of Justice publishes a quarterly periodical
which includes legal articles as well as the important recent decisions of the courts, classified law
reporting is not available to facilitate the task of a judge, lawyer or researcher as to what the
interpretation of a specific rule of law might be.

Source: UAE Company Law and Practice