UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy
5.11 Insolvency Laws Applied by Maritime Courts Insolvency and Bankruptcy Framework in the UAE The UAE operates two distinct court systems, each having its own regime for handling insolvency and bankruptcy cases. Mainland “Onshore” Courts These courts follow a civil law system and apply fed - eral laws. Insolvency applies to individuals without merchant status and is governed by Federal Decree Law No 19 of 2019 on Insolvency. Bankruptcy applies to certain entities, including companies under Federal Decree-Law No 51 of 2023 (the “Financial Restructur - ing and Bankruptcy Law”), which governs bankruptcy for: • companies subject to Federal Decree-Law No 32 of 2021 on Commercial Companies and those incorporated in free zones, except the Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC); • individuals with commercial activities (merchants); and • licensed civil companies of a professional nature. Offshore Courts (ADGM and DIFC) These courts operate under a common law system and their own legal frameworks. In the DIFC, insol - vency is governed by DIFC Law No 1 of 2019 (the “Insolvency Law”). In the ADGM, insolvency is regu - lated by the Insolvency Regulations 2022. While the UAE’s insolvency and bankruptcy laws aim to provide a legal framework for restructuring and reorganisation, they do not have a direct equivalent to Chapter 11 of the United States Bankruptcy Code, which allows for debtor-in-possession reorganisation. Arrest and Judicial Sale of a Vessel During Bankruptcy Regarding the arrest and judicial sale of a vessel owned by entities undergoing bankruptcy proceed - ings, once bankruptcy proceedings are initiated in the UAE under Federal Decree Law No 51 of 2023, the competent bankruptcy court takes over the process. As part of this process, individual creditor claims and lawsuits (including those seeking ship arrests) are typ -
ically stayed. This means that creditors cannot usually initiate actions such as vessel arrests or judicial sales once bankruptcy proceedings have been initiated. However, the bankruptcy court may provide specific relief in certain cases, but in general, such actions are prohibited while the bankruptcy process is underway. The UAE does not have specialised admiralty courts. Instead, maritime claims are treated as commercial disputes and are handled by the general judiciary. Thus, in case of bankruptcy, they are handled by the competent bankruptcy court and once bankruptcy proceedings are underway, the bankruptcy court takes over, and maritime arrests or judicial sales of vessels are generally prohibited unless specific relief is granted. 5.12 Damages in the Event of Wrongful Arrest of a Vessel In the UAE, there is no specific provision under the ML for claiming damages due to wrongful arrest, and there is a limited history of such claims. Generally, the courts do not award damages for wrongful arrest unless the party alleging such arrest can prove that the arresting party obtained the arrest based on fraud - ulent or forged documents. The burden of proof lies with the party claiming wrongful arrest to demonstrate that the arrest was unjustified. Without such proof, the courts are unlikely to grant compensation for dam - ages or costs arising from the arrest. 6. Passenger Claims 6.1 Laws and Conventions Applicable to the Resolution of Passenger Claims Passenger Claims In the UAE, maritime passenger claims are governed by the ML, as the UAE has not ratified the Athens Convention Relating to the Carriage of Passengers and Their Luggage by Sea (1974, as amended). The provisions related to passenger claims are mainly out - lined in Articles 206–220 of the ML, which cover the contract of carriage of persons by sea. Time Limit for Filing a Claim Claims for death or injury during maritime transporta - tion must be filed within two years from the passen -
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