UAE petroleum trading regulations reform: offences and prosecution
UAE / Corporate Structuring
Ali BachrouchPartner,Corporate Structuring
Gretta HabibSenior Associate,Corporate Structuring
The prosecution of petroleum trading offenses and crimes is pivotal in maintaining the integrity and transparency of the petroleum trading industry in the UAE.
Federal Law No. (14) of 2017 on trading in Petroleum Products (“PTL”) complimented by the Cabinet Resolution No. 35 of 2019 and Ministerial Resolution No. 61 of 2020 (“Implementing Regulations”) serve as the cornerstone legislation governing petroleum trading offenses and crimes related to petroleum trading, including smuggling, unauthorized trading, tampering with measuring instruments, and manipulating prices.
The Competent Authority defined under the PTL as the local competent authority for issuing petroleum trading permits plays a central role in overseeing the enforcement of petroleum trading laws, investigating violations, and prosecuting illicit trading of petroleum products in the UAE.
This article aims to outline the pivotal role of the Competent Authority in prosecuting offenders and reconciling disputes related to the illicit trading of petroleum substances and products in the UAE (Section 1) and to define the enforcement procedures undertaken by the Authority in that respect (Section 2).
Under the PTL, the Competent Authority has the authority to prosecute offenders for illicit trading of petroleum products in violation of the PTL. The Competent Authority may also reconcile with offenders regarding these offenses before referring the case to competent courts.
In fact, Article (16) of the PTL provides that no criminal action shall be instituted for any of the crimes stipulated in Article (15) of this law, without a written request from the Competent Authority.
Article (15) of the PTL provides for crimes (i) the violation by the licensee of any of his obligations stipulated in Article (13) of the PTL, (ii) the transportation of petroleum materials in means of transportation that are not licensed to transport petroleum materials or lacking one of the license conditions approved by the Competent Authority and (ii) the supply petroleum products from a person not licensed to trade, knowingly.
The role of the Competent Authority in the prosecution of petroleum trading offenses and the reconciliation remains nonetheless limited to the crimes specified in Article (15) of the PTL which consist mainly in breaches of petroleum Trading Permit’s licensing obligations requirements by the offenders.
For violations and crimes falling outside the scope of offenses listed in Article (15) of the PTL, the public prosecution has the ultimate authority to initiate criminal proceedings against violators as per the UAE criminal applicable laws.
In fact, the legislator has expressly stated under the provisions Article (14) of the PTL mentioned here below, the list of crimes which are subject to direct prosecution without the need of a written request from the Competent Authority, in consideration of the impact of such crimes on the national economy, the security and the environmental safety consist of the following, namely:
Trading of petroleum products in the territory of the State without a license issued by the Competent Authority.
Offering to sell, buy, supply or distribute petroleum materials that do not conform to the standard specifications approved by the Authority.
Possessing petroleum products in commercial quantities of unknown origin with the intention of consuming, distributing, selling or supplying them to others.
Replacing fuel tank by any means of transportation, or addition of a tank to it, or its hull, with the intention of bringing petroleum materials into the state, distributing them, offering them for sale, selling them, or supplying them to others without a license.
In all cases, the competent court shall rule for the confiscation of the seized petroleum materials, and it may order the confiscation of the means of transportation, equipment and devices used in committing the crime, all without prejudice to the rights of bona fide third parties.
The Competent Authority employs a robust enforcement mechanism in order to effectively prosecute petroleum trading offenses.
It possesses the power to conduct inspections, audits, investigations, and inquiries to detect violations of petroleum trading laws. It may request pertinent documents, records, and information from traders, importers, exporters, and other stakeholders involved in the petroleum trading process. These measures facilitate the gathering of evidence and the construction of strong cases against offenders.
When violations are detected, the Competent Authority is also authorised to take appropriate legal action against offenders involved in such activities. The Implementing Regulations prescribe a range of penalties that may be imposed for petroleum trading offenses. The severity of these penalties depends on the nature and extent of the violation and repeat offenders may face more severe sanctions.
For instance, the Competent Authority possesses the power to suspend or revoke trading licenses, impose administrative penalties and fines, and order the confiscation of assets and illegal gains resulting from offenses. These measures serve as potent deterrents, ensuring compliance with petroleum trading laws and regulations.
In addition to the coercive legal measurements, the PTL grants the Competent Authority the right to offer reconciliation to offenders for any of the crimes stipulated in Article (15) of the PTL, before deferring the case to public prosecution.
The Competent Authority may set the terms and conditions for reconciliation, including the amount of the reconciliation fee, which cannot exceed the maximum fine prescribed by law for the offense.
As per the Implementing Regulations provisions, the reconciliation shall be made in accordance with the following procedure:
The infringing licensed person or their legal agent shall submit a request for reconciliation to the Competent Authority on the form prepared for this purpose within (10) working days as of the date of the reporting the offence. The application shall be accompanied by the documents and data issued by a decision of the Competent Authority.
The application shall contain a written acknowledgement from the licensed person or their legal agent of the offence and the date and place of its commission.
The Competent Authority shall examine the application and verify that it meets the required conditions, documents and data.
The Competent Authority shall issue its decision on the application for reconciliation within thirty (30) days as of the date of submission of the application and shall determine in its decision the amount of the penalty to be paid by the violator, the time period required for its payment and the party authorized to receive it, provided that the same is written in a formal report, prepared for that purpose.
The Competent Authority may extend the period referred to in the preceding clause, if the infringing licensed person submits an application to extend it and has serious reasons that prevented them from paying the conciliatory amount within such period.
If reconciliation proceedings are completed, the reconciliation record and its annexes shall be presented to the head of the Competent Authority or their authorized representative to approve the closure of the violation after the violator has paid the conciliatory amount.
It is worth noting that the reconciliation procedures shall not prejudice the licensed person's obligation to remove the causes of the violation and in all cases the criminal case ends with the payment of the conciliatory amount.
In case the violator or the Competent Authority refuses to conciliate, or if the violator does not pay the amount agreed upon in the reconciliation, the Competent Authority shall refer the violation to the competent Public Prosecution under a written letter prepared for this purpose.
In conclusion, the role of the Competent Authority in combatting illicit trading of petroleum products which constitutes a serious threat to the integrity of the country's economy as well as to global energy security, is of paramount importance and essential in safeguarding the integrity of the UAE's economy and ensuring national energy security as the Petroleum trading is a vital sector that significantly impacts the global economy in the UAE.
For further information,please contact Ali Bachrouch or Gretta Habib
Published in August 2023
