UAE Law and Practice Contributed by: Stuart Paterson, Janine Mallis, Tania Forichon and Elif Eren Ozenir, Herbert Smith Freehills Kramer LLP
Liability of the Parent Company There is no automatic law which imposes liability on a parent company for the acts of its subsidiaries. Liabil - ity may arise if: • there is direct involvement in the wrongful act; • there is fraud or abuse that justify piercing the veil; or • the subsidiary is a branch which lacks an inde - pendent legal personality and serves as an exten - sion of the parent company’s operations. The UAE does not recognise corporate liability for “failure to prevent” offences. 1.6 Sentencing and Penalties Under Article 213 of the Criminal Procedural Law, once a defendant is found guilty of a white-collar offence, the prescribed sentence in the relevant law is enforced. Aggravating circumstances outlined in the law are considered during sentencing. Defend - ants may appeal a judgment/sentence from the court of first instance within 15 days of the verdict. UAE criminal law does not recognise deferred prosecution agreements, non-prosecution agreements or plea agreements, so there are no rules or guidelines for penalty assessment under such arrangements. There is no specific law requiring courts to consider corporate culture or remediation as mitigating fac - tors and there are no known cases where these have influenced sentencing. Under Article 97 of the Penal Code, potential mitigating factors include the young age of the perpetrator and committing the crime for non-malicious motives. 1.7 Damages and Compensation Under Article 23 of the Criminal Procedural Law, victims may seek compensation through two main avenues: Criminal Proceedings A victim can request that a civil claim be annexed to the criminal case: • the criminal court considers the claim after criminal liability is established; and
member Sean McGovern to Ireland, a drug-trafficking suspect to the Netherlands, and the arrest of three of Europe’s most wanted fugitives in Dubai. Between 2021 and 2022, the UAE handled 521 money laundering cases, collaborating with international law enforcement agencies to arrest 387 individuals and confiscate AED4 billion (approximately USD1.09 bil - lion). From 2022 to 2024, the Dubai police tackled 500+ cases, exchanging 1,733 financial crime-related dossiers with international partners. 1.5 Corporate and Personal Liability The Companies Law Under Article 21 of Federal Decree-Law No 32 of 2021 (the “Companies Law”), a company acquires “legal personality” upon incorporation, creating a corporate veil between the company and its shareholders/man - agers. This may be pierced in certain cases of fraud, deception or gross error, as confirmed by the Dubai Court of Cassation. The Penal Code Article 66 of the Penal Code establishes that legal persons (excluding government entities) are criminally liable for offences committed by their representatives, directors or agents acting in favour of or on behalf of the company. However, the Dubai Court of Cassation has held that liability does not apply if the employee acted negli - gently, without intent or not in the name of the com - pany. The maximum penalty is a fine of AED5 million. How - ever, victims may also seek compensation under the Civil Procedures Law. Managers’ Liability Managers have a statutory duty of care, and may be personally liable for: • acts causing harm; • breaches of obligations; • gross misconduct or negligence; and • abuse of rights or any other legal breaches (eg, fraud).
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