Shop with Confidence: Redefining Fraudulent Practices in the UAE
Intellectual Property / UAE
The United Arab Emirates (UAE) has recently repealed and replaced its commercial fraud legislation from 2016 with the new 2023 Federal Decree No. (42).
Law Update: Issue 365 - Financial Services Focus
Ahmad ZazaPartner,Intellectual Property
Osama ShabaanAssociate,Intellectual Property
Majd Oghli Trainee Solicitor,Intellectual Property
The United Arab Emirates (UAE) has recently repealed and replaced its commercial fraud legislation from 2016 with the new 2023 Federal Decree No. (42). This new legislation has enhanced consumer protection against fraud in all its forms through several amendments. This article will Expand on the new 2023 law and highlight the most important changes introduced.
The new law has expanded its definition of fraudulent goods to now include goods that don’t conform to the specifications, standards, or descriptions declared by the supplier and goods that are expired or damaged. Moreover, the law now also makes clear a definition of what a “supplier” is. A supplier is defined as person who imports, exports, manufactures, sells, offers, displays, advertises, promotes, distributes, or stores any goods or services. The law also now distinguishes the roles and responsibilities of different entities such as the competent authority, the competent court, the Higher Committee, and the customer.
Suppliers of goods and services are now subjected to new regulations and responsibilities, in an attempt to increase transparency and accountability within the UAE. For example, suppliers are now required to inform customers and authorities of the removal of a prohibited good within a specific time frame. Furthermore, in cases of fraud the supplier is now obliged to replace the item or reimburse the customer. The competent authority will have the power to remove prohibited goods from the market at the supplier’s expense and can even go further by imposing penalties.
The 2023 law also clarifies the authority given to the judicial officers under which they are allowed to inspect, review, seize, and sample goods that are suspected of being involved in commercial fraud offenses. Judicial officers also have the right to enter any non-residential location where goods are stored, produced, or sold at any time, without the need of prior notice or permission.
The new law expanded on the former’s penalties such as fines and imprisonment, administrative measures, withdrawal, destruction, return, closure of shops or places where the crime occurred, and confiscation of tools or equipment used in the crime.
The new law also increases the penalties and sanctions for commercial fraud offenses, both in terms of fines and imprisonment periods. The new law sets minimum fines ranging from AED 5,000 to AED 100,000 and maximum fines ranging from AED 1,000,000 to AED 2,000,000 depending on the nature and severity of the offense. The new law also sets imprisonment periods ranging from 6 months to 2 years, with the possibility of extending them in case of aggravating circumstances. These penalties are meant to deter and punish violators and to protect the public interest.
In addition, the new law expanded the scope of the application of the penalties to include the liability of managers of entities that violate the provisions of the law. It stipulates that if the person responsible knew about the crime and did not take necessary measures to prevent it, they shall be punished with penalties including imprisonment for up to two years and fines ranging from 5,000 to 1 million AED, depending on the type and value of the goods involved in the fraud. Moreover, if the crime was committed by an employee in the name or benefit of the entity, the person responsible shall be jointly liable for paying the imposed fines.
The new law also introduces a reconciliation mechanism, which allows the offender to settle the case in exchange for paying a fine, under certain conditions and procedures. The reconciliation option is only available for offenses that do not involve human food, animal feed, medical drugs, agricultural crops, or organic food products, and that do not cause serious harm to the customers or the public health or safety.
The new law also specifies the procedures and requirements for appealing the decisions related to commercial fraud. An appeal must be filed within 15 days from the date of notification of the decision before the competent authority and must be supported with documents and evidence. The appeal must be decided within 30 days from the date of filing, and the decision of the appeal is final and binding. In relation to court custody and release of seized goods, there has been more information released. For example, the competent court must rule on a request to release seized goods that are likely to perish or deteriorate within 24 hours and seized goods must be released if a court order upholding the seizure is not issued within 45 days.
The overall objective of the new 2023 law is to combat commercial fraud in the UAE by increasing transparency and accountability as seen by the increasing regulations and penalties. This serves as a means to deter the rampant consumer fraud in the UAE and protect consumers from malicious practice. The law also aims to trading in imitated, fraudulent, or rotten goods, which are goods that are changed, spoiled, or counterfeit. Moreover, the law aims to create a legal commercial environment that encourages intellectual property rights protection by prohibiting the import, export, production, manufacture, offer, sale, store, transfer, market, circulating, promotion, disposal of, or possession for the purpose of sale, any counterfeit goods.
For further information,please contact Ahmad Zaza, Osama Shabaan and Majd Oghli.
Published in February 2024
