Jordan
Dana Abduljaleel Partner
Zaineh Al HanandehTrainee Solicitor
Zein AlHmoud Trainee Lawyer
The lending and borrowing of securities are critical components of financial markets, promoting liquidity and efficiency while enabling practices like short selling. As markets evolve, regulatory frameworks must keep pace to address emerging risks and opportunities. In 2024, the Jordan Securities Commission (the “JSC”) proposed a revised draft of the Securities Lending and Borrowing Instructions (the "Draft Instructions") that is set to repeal and replace the current framework established in 2017 (the “Current Framework”). These Draft Instructions, which have yet to be officially issued, reflect a forward-facing approach, leveraging the authority granted to the JSC by virtue of Article 118(b) of the Securities Law No. 18 of 2017 (the “Securities Law”) to anticipate and address future market dynamics.
This legal foundation delegates the JSC to establish comprehensive regulations for various activities, inter alia, securities lending, borrowing, and short selling. Once ratified, these Draft Instructions aim to align Jordan’s regulatory infrastructure with global best practices, mitigating systemic risks, and lay the groundwork for a more reliable and transparent securities market heading into 2025. Below, we examine the key differences the Draft Instructions propose and their implications, including measures to reduce market manipulation in short selling under the Draft Instructions.
The Juxtaposition
Scope and Definitions
The Current Framework introduced and defined key terms such as the "Securities Commission", the "Central Depository", and "Short Selling" which are central to and serve as the foundations to the Current Framework. Whilst the Draft Instructions retain these essential definitions, they seem to shift the emphasis towards clarifying procedural aspects and clarify the roles of market participants. The Draft Instructions further draw a contrast and disengage between a lending agent and a borrowing agent, as opposed to the current catchall definition of an agent. This ensures that the updated framework is more comprehensive and operationally efficient.
Licensing and Authorization
The Draft Instructions maintain the licensing requirements imposed by the Current Framework to engage in securities lending and borrowing activities, and further built on this requirement by introducing stricter conditions and oversight mechanisms. These changes likely aim to reinforce market compliance and revise participant accountability.
Contractual Obligations
The Current Framework provides for details on the contractual requirements for lending and borrowing agreements, and specifically the need for written agreements and specific terms to govern any such arrangements. Nevertheless, the Draft Instructions have expanded on these requirements, mandating more detailed provisions on the responsibilities and protections in the executed agreements to provide greater protection for market participants.
Collateral and Guarantees
The Current Framework mandates a minimum collateral value to be deposited by the borrower prior to the execution of the lending, which is set at 35% of the borrowed securities market value at the time of the transaction, and in any case, the collateral must not fall under 120% of the borrowed securities' market value for the duration of the borrowing. The Draft Instructions have revised the collateral requirements shifting the obligation onto the lender’s agent to maintain a collateral deposited in a dedicated account that is no less than one hundred percent (100%) of the borrowed securities market value at the time of the transaction, for the duration of the transaction.
Measures to Reduce Market Manipulation in Short Selling Under the 2024 Instructions
The Draft Instructions implement new measures to address risks associated with short selling, and most notably providing for added safeguards with regards to the monitoring and adjustment of collateral. This ensures that the value of the collateral remains sufficient to cover the borrowed securities, reducing the risk of default and remediating market confidence. Most notably, these include:
A reduced minimum collateral value set at 100% of the borrowed securities' market value, ensuring lender protection and reducing the risk of default.
Regular recalculations of collateral value based on market prices are required, with borrowers obligated to top up collateral if its value drops below the prescribed threshold.
The Draft Instructions provide a more comprehensive list of avenues through which lending and borrowing arrangements may be terminated, including a) the expiration of a loan period unless otherwise renewed; b) mutual agreement between the parties for the termination of any such arrangement; and c) regulatory intervention by the JSC, allowing them to intervene and terminate agreements if the JSC deems it necessary to protect market integrity.
By introducing stricter oversight and compliance safeguards, the JSC has limited the scope of its engagement in securities lending and borrowing to licensed entities that shall adhere to compliance requirements including regular audits undertaken by the JSC.
Specific Provisions for Short Selling
The Draft Instructions have adopted specific provisions regulating short selling activities in the Jordanian market, whereby short selling orders must be placed at a price higher than the last traded price, a measure designed to prevent downward price manipulation. Additionally, market participants are required to disclose their short selling positions, enabling greater transparency and allowing the JSC to monitor and address potential instances of market manipulation.
Conclusion
This revision marks a pivotal step in adapting Jordan’s financial market infrastructure to future challenges and opportunities. It is likely unsurprising and may be rather perceived as a routine update reflecting the fluctuating market conditions and the JSC’s efforts at aligning local frameworks to evolving market practices. Once ratified by the JSC’s Board of Commissioners, the Draft Instructions revise the current collateral and reporting requirements which may mitigate risks, enhance investor confidence, and potentially promote market stability as 2025 commences. Conversely, these changes may introduce an increased administrative burden, requiring financial institutions to adapt to more thorough compliance, reporting, and oversight mechanisms.
Additionally, the provisions targeting short selling and the introduction of stricter regulations significantly reduce the likelihood of unethical practices, contributing to market integrity, investor protection, and more transparent market environment. With eyes on the horizon, these reforms position Jordan’s capital markets to navigate an increasingly interconnected and dynamic financial landscape.
Jude BilbisiTrainee Lawyer
Carma Estetieh Trainee Lawyer
In a significant step towards modernizing labour protections in Jordan, the Council of Ministers has ratified the Labour Law Amendments Draft of 2024 (the “Amending Law”) to amend the Labour Law No. 8 of 1996 (the “Labour Law”). These amendments, which will come into force in 2025, represent a forward-looking approach to addressing emerging challenges in the labour market through enhancing workers’ rights. Key changes are provisions that address flexible work contracts, termination of employees, and a minimum wage increase.
Minimum Wage Adjustments and Wage Transparency
Significant amendments to the Labour Law include minimum wage and wage transparency requirements. The Amending Law requires employers to ensure that wages meet the minimum threshold set by the government, which has been recently increased by JOD 30. Employers must also display clear notices regarding the minimum wage within the workplace, ensuring that employees are fully aware of their entitlements and paid fairly for their work.
The 2024 Labour Law Amending Law marks a significant step forward in protecting workers' rights and modernizing Jordan's Labour Law.
The Amending Law further mandates that salary increases be based on clear and objective criteria, such as job performance, rather than arbitrary factors. This provision aims to eliminate bias and ensure that workers are rewarded fairly for their contributions, promoting a merit-based and transparent wage system.
Additionally, wage discrimination is expressly addressed by the amendments. The previous definition of wage discrimination in Article 2(2) of the Labour Law was replaced with a new definition that specifically addresses inequalities in remuneration for the same work based on gender. This change aims to close the gender pay gap and ensures that employees are compensated equally for performing the same work.
Termination
Article 31 of the Labour Law, which previously outlined termination procedures, has been repealed and replaced with a more robust provision designed to protect employees from unfair dismissals, especially in cases where employers experience economic limitations, as employers will be required to provide a written notice explaining the reasons for the dismissal. This requirement ensures transparency in the termination process, by providing a valid, documented reason for terminating a contract, by maintaining accurate records and documenting their justifications for the same. Failure to do so could expose employers to legal challenges and financial liabilities.
In addition to the procedural safeguards regarding termination, the Amendment clarifies the calculation of severance pay. Severance pay shall be calculated according to the employee's most recent salary, rather than an average of earnings over the course of employment. This change ensures that unfairly dismissed employees receive compensation that reflects their current earnings, rather than a potentially lower average.
Paragraph 5 of Article 28 has been amended to allow termination without notice of employees who are absent for 10 consecutive or intermittent days. Paragraph 9 of this provision also introduces sexual assault or harassment as grounds for dismissal without notice.
For employers, these changes underscore the importance of having well-documented, justifiable reasons for termination and ensuring compliance with the revised procedures. For employees, these amendments provide stronger protections against arbitrary dismissal and ensure fairer compensation upon termination.
Flexible Work Regulations
The introduction of Flexible Work Regulation No. 44 of 2024 marks a major shift in work arrangements in Jordan. This regulation, which came into effect on 31 August 2024, introduces more flexibility in the workforce, allowing employers and employees to tailor work schedules to meet individual needs. The regulation provides various forms of flexible work contracts, including remote work, part-time work, flexible working hours, compressed work weeks, and seasonal work.
The regulation mandates employers to provide tools and resources to support these flexible work arrangements, ensuring that employees under flexible contracts enjoy the same rights and benefits as full-time employees. This includes continued access to Social Security benefits. The regulation also requires flexible work arrangements to be documented through written agreements, outlining the specific terms and conditions under which these arrangements will take place.
For both employers and employees, the introduction of flexible work arrangements helps achieve a better work-life balance and provides opportunities for more inclusive employment. Employers are encouraged to adapt their internal policies in line with these provisions, promoting equality and inclusive work environments.
Overtime Work and Compensation
In addition to flexible work arrangements, the Amending Law also regulate the management and compensation of overtime work through the Overtime Work Instructions No. 23 of 2024. These instructions, which shall come into force on 1 January 2025, impose clear limits on overtime work, capping the duration of paid overtime to three months per year, with a maximum of three hours per day or ten hours per week. Should these limits be exceeded, employees are entitled to administrative leave in lieu of financial compensation.
The instructions also establish clearer compensation rates for overtime, based on job categories and salary brackets, ensuring transparency and consistency in overtime pay. Furthermore, employees are required to submit detailed reports on their tasks and progress during overtime hours.
Social Security Corporation Law Amendments
Aside from the amendments to the Labour Law, the Social Security Corporation Draft Amendments of 2024 introduce reforms aimed at expanding social protection to non-Jordanian employees. Non-Jordanians residing in Jordan, who have made at least 120 mandatory contributions to the Social Security Corporation, will now be entitled to old age, disability, and death insurance, as well as unemployment benefits. This represents a significant expansion of social security protections, ensuring that non-Jordanian workers have access to the same benefits as their Jordanian counterparts.
Additionally, an express requirement for employers to pay Social Security contributions for employees on maternity leave was introduced, ensuring that their Social Security entitlements are preserved during their absence.
The 2024 Labour Law Amending Law marks a significant step forward in protecting workers' rights and recognizing changing work dynamics, including flexible working and overtime arrangements. These changes strengthen the legal protections for workers whilst fostering a more equitable and inclusive labour market.
For employers, these changes will require a review of human resources policies and workplace practices to ensure compliance. For workers, the Amending Law is a meaningful step towards greater fairness, inclusion and transparency that meet aspirations of the future labour market.
Tareq MadanatSenior Counsel
Celine Kishek Trainee Lawyer
The Draft Electricity Law of 2024 (the “Draft Law”) was recently published by the Legislation and Opinion Bureau for public consultation. Once enacted and published in the Official Gazette, it will replace the Temporary Electricity Law No. 64 of 2002 (the “Temporary Electricity Law”), which currently governs the energy sector in Jordan, and would represent the first major overhaul of the sector’s primary legislation since 2002. The Draft Law aims to introduce substantive reforms that will enhance electricity consumption and efficiency, regulate energy storage to promote the use of renewable energy, and stimulate competition and investment in this area in 2025.
In light of these changes, 2025 is set to be a pivotal year for the sector as stakeholders anticipate both the enactment of the Draft Law and the issuance of its subsidiary legislation, which will provide further clarity and guidance.
Overview of the Main Amendments The Draft Law introduces the following main amendments:
Electrical Energy Storage Facilities: Permitting transmission, distribution, generation or independent transmission licensees to establish, manage, and operate electrical energy storage facilities in accordance with regulations to be issued by the Energy and Minerals Regulatory Commission (the “EMRC”), and allowing the establishment, ownership, and operation of electricity storage stations for private use. These provisions are expected to bolster private-sector participation by removing barriers to entry and providing clear guidelines for energy storage activities.
Green Hydrogen Projects: Permitting self-generation of electricity and independent transportation of electricity not connected to the central transmission grid.
Independent Transmission Systems: Permitting the creation of independent electricity transmission systems to transport electricity generated by independent self-generation plants for private use, and allowing owners of independent self-generation plants to establish independent transmission systems to transport electricity generated by their facilities.
Distribution Companies’ Expanded Role: Permitting distribution companies to operate at higher voltage levels than currently permitted and allowing them to establish power generation stations to supply electricity in different regions of Jordan, aiming to maintain the continuity of the distribution network.
Reiterating transition in market Model: Reinforcement of the EMRC’s aim to transition from a Single Buyer Model to a Competitive Electricity Market Model. This shift underscores a commitment to fostering a competitive environment, which will likely reduce electricity costs and improve service quality for consumers over the long term.
Energy Storage Facilities
The activity of storing energy will require an EMRC license. However, an exception can be made in the event of storage of energy in a single location and for private use, provided the storage capacity does not exceed predetermined the limits.
Licensed entities may also be authorized by the EMRC to establish, manage, and operate electrical energy storage facilities, provided the activity is encompassed within the entity’s existing activity. Further, any individual may establish, manage, and operate an electrical energy storage facility if it is for the purposes of private use.
We note that entities operating in Jordan will need to align operations with the abovementioned new licensing requirements, creating a need for strategic compliance planning.
Self-Generation of Electricity and Independent Transmission System
The Draft Law introduces a definition of green hydrogen as “hydrogen produced by the chemical decomposition of water using renewable energy.”
In connection with the above, the EMRC will enable consumers to generate electricity from renewable energy sources to meet their needs, and to transmit the same either through the national transmission or distribution system, or through independent transmission systems. The enabling of self-generation and independent transmission can empower consumers to transition to cleaner energy sources and potentially reduce energy costs.
Independent Transmission Systems
Article 13 of the Draft Law allows any electricity company which owns a transmission system to establish a separate entity for the purpose of operating an independent transmission system. An independent transmission system is a private transmission network designed on a nominal electrical voltage, not connected in any way to the transmission system, and used to transmit electrical energy generated from storage facilities connected to the transmission system for the purpose of producing green hydrogen, or other purposes to be determined by the EMRC.
The Draft Law aims to introduce substantive reforms that will enhance electricity consumption and efficiency, regulate energy storage to promote the use of renewable energy, and stimulate competition and investment in this area in 2025.
Distribution Companies
In connection with wholesale distribution companies licensed by the EMRC, the Draft Law has introduced a possibility for these companies to enter into contracts for the storage of electrical energy exceeding 5 megawatts with individuals and/or entities who have obtained a storage license until the Council of Ministers decides to transition into a competitive market method for wholesale distribution.
Additionally, distribution systems will now be permitted to operate at voltages exceeding 33kV, in accordance with instructions to be issued for this purpose. This enhances their ability to ensure uninterrupted electricity supply and accommodate growing demand across different regions in Jordan.
Transition in Market Model
Article 27 of the Draft Law reiterates the EMRC’s intention, as outlined in the in the Temporary Electricity Law, to continuously monitor the development of the sector for the purposes of transitioning from a Single Buyer Model to a Competitive Electricity Market. We note that the Jordan Energy Strategy 2020-2030) further elaborates on this transition, highlighting it as a strategic initiative aimed at enhancing competitiveness and reducing production costs in the industry.
Increased Penalties for Violations
The Draft Law provides a twofold increase of the existing penalties for the following violations of the law:
unauthorised transmission, generation, or distribution of electricity or unauthorized operation of a transmission system;
illegal connections to the electrical system or theft of electricity;
intentional acts of sabotage, damage, or tampering with electrical installations; and
intentional breaking of electrical meter seals of a company supplying electric energy, with the intention to steal the same.
Further to the above, the Draft Law has introduced two penalties as follows:
a penalty for unlicensed individuals carrying out electrical energy storage work with a storage capacity exceeding the predetermined amount. The penalty is imprisonment between one to three years and/or a fine ranging from JOD 100,000 to JOD 200,000; and
a penalty for individuals violating the electrical allowance distances. The penalty shall be a fine ranging from JOD 500 to JOD 100, and the penalty shall be doubled in the case of repetition.
The Draft Law represents a significant step towards reforming Jordan’s energy sector. By enhancing the regulatory framework and encouraging investment in renewable energy, including green hydrogen and energy storage, the law aims to improve energy efficiency, stimulate competition, and attract further investment into the sector. The increased penalties for non-compliance reinforce the need for stringent oversight to ensure that energy supplies are safely and legally managed. The anticipated changes will have broad implications for entities operating in Jordan’s energy and utilities sectors and shall be closely monitored, and stakeholders should remain alert for the enactment of subsidiary legislation.
