Cartels 2020

Last Updated June 12, 2020

UAE

Law and Practice

Authors



BSA Ahmad Bin Hezeem & Associates LLP has expanded greatly since its launch in Dubai in 2001, and now has nine offices throughout the Middle East. The firm has a reputation for delivering high-quality legal services and has become a “go-to” option for magic circle firms seeking advice and guidance on local laws. The firm's lawyers, advocates and legal consultants come from a diverse range of backgrounds, with the majority being bilingual in languages such as English, Arabic and French. Key practice areas include arbitration and dispute resolution, banking and finance, commercial, construction, corporate and M&A, cybersecurity, employment, energy, insurance and reinsurance, intellectual property, litigation, restructuring and bankruptcy, real estate, tax and VAT and technology, media and telecoms.

The laws and regulations which allow for cartel behaviour and its effects to be challenged are as follows:

  • Federal Law No. 4 of 2012 on the Regulation of Competition (“UAE Competition Law”) provides the statutory basis for both defining and challenging cartel behaviour in the UAE. The provisions in this statute that relate to challenging cartel behaviour are as follows:
    1. Chapter 4 of the Competition Law defines the "Anti-Competitive Practices" that are considered to be an abuse of market conditions and would prevent the usual economic mechanisms of competition.
    2. Article 5 of this chapter provides the definition of "Restrictive Agreements", which are agreements between establishments with the aim of "violating, reducing or preventing competition". The scope of this definition particularly includes behaviours that cause an increase, reduction or fixation of prices, colluding in respect of tenders and/or buying supplies from a particular establishment and restricting the flow of supply to artificially influence market conditions.
    3. Article 6 of the chapter defines the conditions that would amount to an "Abuse of a Dominant Position", prohibiting behaviours such as predatory pricing, price discrimination, the imposition of artificial conditions on supply and knowingly disseminating inaccurate information relating to goods and their market prices.
    4. Article 9 of the chapter stipulates the provisions regarding mergers and acquisitions in any one industry, under the heading of "Economic Concentration". Any entity that merges with another and exceeds the market share percentage threshold set by the UAE Cabinet must obtain prior approval.
  • The UAE Competition Law is given effect into law by the implementing regulations provided for by Resolution No. 37 of 2014 concerning the Implementing Regulation of the Federal Law No. 4 of 2012 on the Regulation of Competition. These regulations prescribe the conditions for exemptions, in addition to the basis on which complaints against cartel behaviour can be filed and examined. According to the implementing regulations, any stakeholder may submit a complaint to the Competent Authority concerning a violation of the provisions of the UAE Competition Law. Any complaint filed before the Competent Authority must contain the following information:
    1. the complainant or complainants;
    2. the party(ies) against whom the complaint is filed;
    3. the provisions of the Law claimed to be violated;
    4. the facts related to the violation of the provisions of the Law;
    5. the practices claimed to have violated the provisions of the Law; and
    6. evidence and documentation supporting the complaint.
  • In 2016, Cabinet Decision No. 13/2016 was effected by law and defined the "Ratios and Controls Related to the Application of the Competition Law". The provision regulates the market share thresholds of entities and provides more guidance on the permitted ratio of market share in the event of inquiry or commercial transactions.
  • UAE Civil Transactions Law No. 5 of 1985 and its amendments – “The UAE Civil Code” – establishes tort liabilities and can be used to initiate a civil action to claim damages arising from any anti-competitive conducts and activities.

A statutory body has been formed in accordance with Article 12 of the UAE Competition Law, referred to as the Competition Regulation Committee (“The Competition Committee”). The Competition Committee has been established in order to advise the Ministry and its composition is at the discretion of the Cabinet. Under the direction of the deputy Minister of Economy, the Competition Committee is responsible for several functions concerning the UAE Competition Law, including the monitoring of the implementation of the law and subsequently making appropriate recommendations to the Minister and Ministry of Economy. However, the functions of the Competition Committee are broad and are defined by statute to extend to "any other duty related to the protection of competition in the UAE as may be assigned to it by federal or any other relevant state authorities."

Under the supervision of the Competition Committee, a body defined in the implementing regulations as the “Competent Authority” has been set up as "the department concerned with competition", which manages applications, investigations and the general governance of the Competition Law in the UAE. This body prepares reports and recommendations to the Competition Committee and the Ministry as necessary for further escalation and/or action.

In addition to the Competition Committee, there are several Federal and Local Authorities that are entitled by law to organise, control or supervise specific economy sectors in the state, such as:

  • the Dubai Economic Security Centre (DESC), which possesses rulemaking powers including those relating to sanction compliance and the issuance of administrative penalties;
  • the Dubai Financial Services Authority (DFSA), which possesses jurisdiction in relation to DIFC financial matters and can issue penalties such as bans, fines and restrictions;
  • the Emirates Securities & Commodities Authority (SCA), which is relevant to onshore UAE. The SCA has broad investigative powers as prescribed by the SCA Law and can issue administrative penalties such as warnings, freezing orders, fines and the suspension of a licence; and
  • the Dubai International Financial Centre (DIFC), which is a free-zone territory in the UAE that is subject to its own civil laws and regulations, based on a common law system, and is permitted to issue appropriate civil sanctions.

All proceedings brought by the Competition Committee and the regulatory bodies are civil and administrative, and such bodies do not have criminal jurisdiction. Should criminal conduct be suspected by any of the regulatory bodies, they will make a referral to the police and/or the public prosecution.

As per Article 16 of the UAE Competition Law, sanctions can range from AED500,000 to AED5 million for entities that breach the provisions.

In practice, all clearance or applications for approvals on commercial activities are filed to the UAE Ministry of Economy/Competition Department to review the activities, accept the transaction and ensure that there has been no violation of the UAE Competition Law. The Ministry also receives complaints on competition law violations and assesses all claims made against entities based in the UAE. As the UAE Ministry of Economy aims to facilitate business and support both foreign and national investment, it prioritises resolving issues amicably at the Ministry level, and urges any party to correct their standing, status and commercial conduct if it observes any violation of the UAE Competition law. Failure to comply may result in further escalation of the issue and the imposition of fines based on the Minister’s judgment and/or referral to the public prosecution office for criminal proceedings. As far as is known, there is no precedent in the UAE where any party was referred by the UAE Ministry of Economy to the public prosecutor to address criminal charges based on a breach of the UAE Competition Law.

A private right of action is available to any entity that has suffered any damages due to a violation of the provisions of the UAE Competition Law, to claim for compensation. Article 23 of the UAE Competition Law states that “the sanctions set out in this law shall not prejudice the right of the harmed party to have recourse to the Court to claim compensation for the damages arising from violating any provision of this law.” The standing to file a civil action based on the UAE Civil Code remains available as an option and any suffering party may pursue a civil claim to claim damages. The proof of damages could be a complicated process as direct damages and loss in profits must be proven to be linked to the anti-competitive activity and the link or causation of this damage must be established accordingly.

The definition of cartel conduct can be inferred from the UAE Competition Law and is further supplemented by its implementing regulations. The UAE is a civil law system where precedent is not binding but can be considered by lower courts to ensure consistency of orders. A recent act was issued in the UAE in 2020 to establish a judicial committee that will work to ensure harmony and consistency in judgments and judicial precedents by Higher/Supreme Courts. This step should give an indication that the UAE legislator wants to support the judicial system with an act that supports the recognition of precedents.

It is important to note that each case and/or complaint will be assessed in isolation, in accordance with the facts and interpretation of the relevant statutes and regulations. Cartel conduct – ie, anti-competitive practices can be divided into two categories: "Restrictive Agreements" and the "Abuse of a Dominant Position".

Restrictive Agreements are any agreements between establishments that have the aim of "violating, reducing or preventing competition". The violations that would fall under this heading specifically include the following:

  • limiting the sale or purchase price of products and services, directly or indirectly, by causing an increase, reduction or fixation of the prices to the detriment of competition;
  • limiting the conditions of sale, purchase and performance of the service and the like;
  • colluding in tenders or bids in auctions and other supply offers;
  • freezing or reducing production, development, distribution and sale operations, as well as all other aspects of investment;
  • colluding against buying from a specific establishment(s), selling to or supplying the same, and preventing or obstructing the practice of their activities; and
  • restricting the free flow of products and services to a specific market or withdrawing the same from said market in order to hide or store them unlawfully, or refraining from dealing with the same or creating a sudden abundance of such products and services that leads to them being traded at unrealistic prices.

The definition of restrictive agreements is further extended to include the division of markets if doing so has an adverse impact on competition, and the establishment of barriers to entry for other entities by obstructing alliances and networks.

A dominant position in the UAE is defined as a situation where "the market share of an entity surpasses the proportion of the overall transactions in the market." The Cabinet has full discretion to decide whether an entity exceeds the limitations.

The UAE Competition Law prohibits any entity that has a dominant position in a relevant market from performing "any acts or works that may lead to an abuse of the position and to the violation or reduction or prevention of the competition." The statute specifically mentions the following acts, although the interpretation of this act can be much broader than the defined list:

  • imposing prices or terms for reselling products and services directly or indirectly;
  • selling a product or a service for a price that is lower than its real cost in order to obstruct the entry of the establishments to the market or to exclude them from it, or in order to expose them to big losses that make it difficult for them to carry on with their activities;
  • discriminating between customers of similar contracts without any justification as for the products and services prices or for the terms of their sale or purchase contracts;
  • compelling a client not to deal with another competing establishment;
  • refusing to deal in part or in whole according to common trading conditions;
  • unjustifiably refraining from buying or selling products or services, or restricting or obstructing such dealing in a way that causes a prevalence of unrealistic prices;
  • suspending the conclusion of a contract or agreement for buying or purchasing products and services unless with the consent to commit to deal with other products and services that are, naturally or by the commercial use thereof, not related to the original subject of the transaction or agreement;
  • knowingly spreading wrongful information concerning the products or prices thereof; and
  • decreasing or increasing the available quantities of the product in order to create a virtual shortage or abundance of the goods.

The following sectors, activities or bodies are listed in an Appendix of the UAE Competition Law as being permitted to operate outside the scope of the UAE Competition Law:

  • the telecommunications sector;
  • the financial sector;
  • cultural activities (readable, audible and visual);
  • the oil and gas sector;
  • the production and distribution of pharmaceutical products;
  • postal services, including the express mail service;
  • activities related to the production, distribution and transportation of electricity and water;
  • activities on the treatment of sewerage, garbage disposal, hygiene and the like, in addition to supportive environmental services thereof; and
  • the sectors of land, marine or air transport, railway transport and services related thereto.

The Cabinet reserves the right to amend the named sectors, activities and services at any time.

The sectors listed by statute are broad but are likely to have been considered to be entitled to benefit exemption on the basis of their overall contribution to the economy and society. Like many jurisdictions, there is also a need to protect and nurture native entities against the competition of larger international entities.

In addition to the sectors named above, government owned or controlled entities and SMEs are considered to be exempt from the provisions of the UAE Competition Law. As per Cabinet Resolution 22 of 2016, to benefit from the exclusion, an SME must have fewer than 200 employees, or fewer than 250 employees for the industrial sector.

There are a few precedents set by the Competition Committee in terms of providing clearance – ie, approval – on potentially anti-competitive deals such as mergers and acquisitions, and violations that said committee has addressed, opined and issued administrative orders to parties. In those precedents, many competitors had worked on deals that were viewed as being in compliance with competition laws, such as the acquisition of major competitors. The UAE Ministry of Economy functions to support commerce and trade within the UAE, and has worked with parties to ensure their actions are in compliance with regulations rather than finding gaps through which to sanction parties, impose unnecessary restrictions or block any sizeable deals that can strengthen the UAE's position in the regional and global economy.

The general rule for time bar/statute of limitation for civil claims in the UAE is 15 years (civil transactions law) and ten years for commercial claims. However, there are some exceptions as the law says that no claim for compensation arising out of a harmful act shall be heard after the expiration of three years from the day on which the defendant became aware of the occurrence of the harm and of the identity of the person responsible for it.

Furthermore, the law states that, if a claim arises out of a crime and the criminal proceedings are still current after the expiry of the time limit referred to above, the claim for compensation shall not be barred. This should be relevant for cartels claims.

In any event, no claim for compensation shall be heard in any case after the expiration of 15 years from the day on which the harmful act took place. No specific time bar or limitation is in place for UAE competition law, so reference should be made to the above provisions.

There are practical and subjective limitations for the issue of personal jurisdiction. However, in accordance with the UAE Competition Law, the Competition Committee is not restricted from reviewing, ruling or deciding on anti-competitive transactions/activities that occur overseas in foreign countries if there is a direct effect on the UAE market, such as locally established entities or consumers and if complaints are raised to the Competition Committee to issue a ruling or impose sanctions.

In accordance with Article 3, the provisions of the UAE Competition Law and associated regulations are applicable to all activities carried out by entities in the UAE, but will also apply to any economic activities practised outside the UAE that either directly or indirectly impact competition conditions in the UAE. The provisions particularly include the exploitation of intellectual property rights inside and outside the UAE.

In accordance with the definition of scope, the UAE Competition Law and its regulations would be applicable to conduct that occurs outside the jurisdiction if such conduct affects competition in the UAE or is related to the exploitation of intellectual property rights. However, in practice, the enforcement of the UAE Competition Law and its regulations against entities incorporated in a foreign jurisdiction faces restrictions and obstacles.

Based on observations since the UAE Competition law was enacted and enforced, the Competition Committee is unlikely to exercise its power or mandate to review any activities that occurred entirely overseas in a foreign jurisdiction and between two foreign entities that do not have a presence in the UAE. As far as is known, there is no precedent to demonstrate otherwise.

In accordance with Article 235(1) of the UAE Civil Procedure Code, judgments that are held in a foreign country may be executed in the UAE on the same basis as judgments and orders issued in the UAE can be executed in the country in question if said judgment meets certain formalities, requirements and prerequisites stipulated in the law. Such conditions prior to the enforcement of a foreign judgment include the following:

  • reciprocal obligations of recognition;
  • a lack of jurisdiction over the matter in domestic courts;
  • the issuance of an enforceable judgment in the foreign jurisdiction;
  • the proper notification and representation of the parties; and
  • the enforcement does not violate public orders in the UAE.

Due to the requirement for mutuality of obligations, amongst other restrictions, the principles of comity are rarely enforced in the UAE nor accepted by local courts. Whether or not to accept the enforcement case would be subject to the full discretion of the court. Judgments issued by countries that have bilateral conventions with the UAE are more likely to be considered enforceable in the UAE.

There are some precedents for enforcing foreign judgments in the UAE, such as orders issued by the DIFC Court, which is the only common law system court in the UAE and is based in DIFC Free Zone. It has enforced foreign judgments issued in disputes that are enforceable according to the DIFC court system. After the DIFC Court issued its order to enforce a foreign judgment, the plaintiff pursued further enforcement measures before the Dubai Main Court, alleging the enforcement of a court order issued by the DIFC.

As far as is known, there is no precedent or case law example where foreign court judgments in cartel or competition disputes were enforced in the UAE. This is also not expected to occur in the future, based on current practice and the legal landscape that regulates anti-competition activities.

Any stakeholder may file a complaint with the Competent Authority regarding any violation of the UAE Competition Law. The complaint shall include the information listed under 1.1 Statutory Bases for Challenging Cartel Behaviour/Effects.

Once the complaint is filed, the Competent Authority will initiate an investigation by examining the complaint, along with the supporting evidence. If necessary, the Competent Authority may request the complainant to provide additional documentation to assist with the examination. Any requests for further documents or materials by the Competent Authority must be sent to the complainant within a period of 15 days.

Once the complaint has been examined, the Competent Authority shall issue a notification to the complainant either accepting the complaint on the basis of adequate grounds to proceed with a formal investigation into the complaint, or rejecting the complaint due to insufficient findings of wrongdoing, based on the information provided.

If the complaint is accepted, the Competent Authority will notify the subject of the complaint (the “defendant”) and will give the defendant ten days to defend their conduct or activities that may contravene the UAE Competition Law and implementing regulations. The complaint notification shall fully detail the allegations made against the defendant, the practices that are perceived to be in contravention of the UAE Competition Law and the particular provisions of the UAE Competition Law that are being breached by the defendant's conduct.

The Competent Authority shall review the defendant's response, along with the submitted supporting evidence. If the Competent Authority requires further information or documentation, it will notify the defendant and grant a deadline of 30 days for submission. It is possible to obtain an extension of a further 30 days for submission, if this would not prejudice or affect the investigation.

The Competent Authority has broad investigative powers and may undertake any form of procedure it believes necessary in order to fully investigate the complaint. This includes conducting meetings and interviews with all parties involved in the complaint, including employees, and the seizure of files, documents, information and data.

Once the Competent Authority is satisfied that the investigation has been fully conducted, it will prepare its detailed report and recommendation to the Ministry of Economy. This report shall include comprehensive information about the facts of the complaint, the procedures taken by the Competent Authority to investigate the complaint, an evaluation of the information, evidences and pleas submitted by the parties, and a recommendation in respect of next steps. The Competent Authority shall submit the detailed report to the Ministry of Economy within ten days.

The Ministry of Economy shall review the complaint and recommendation submitted by the Competent Authority and reach its verdict within 30 days from the receipt of the report. The parties will be notified of the decision within ten days from issuance of the verdict.

Dawn raids do not occur in connection with competition issues in the UAE, but they remain possible since the UAE Ministry of Economy has the statutory power to regulate and monitor the commerce market. The Ministry has many inspectors that arrange for surprise visits, raids or inspections for other purposes, such as consumer protection, commercial agencies and other reasons. The inspection normally happens in co-ordination with officials at local emirate authorities – ie, the economic departments of each emirate.

In raid actions, inspections or surprise visits, the entity needs to be regulated by a regulatory body in the UAE mainland. Assigned inspectors from the regulatory body may have the authority to enter the registered offices of the entity, usually in co-ordination with local administrative authorities, such as the economic department, and to inspect any relevant documents or records. Each regulatory body has its own guidelines, but notice would typically be given to the entity prior to any visit. A report for a raid action is issued to document the findings and statements provided at the time of the raid.

An entity is generally not strictly required to hand over information at this stage of administrative raids, but the failure to do so is likely to be considered antagonistic and could affect the final outcomes. During an inspection visit, the regulatory body would be able to seek assistance from the police to progress or handle any resistance from granting access.

The police in the UAE are permitted to undertake a dawn raid without a warrant if the investigation relates to a crime that is in the process of being committed or that they suspect has just been committed. Usually, the police arrange to obtain a warrant from the public prosecution before attending any pre-arranged raid action.

It is important to note that the Competition Committee normally reviews complaints, responses and evidence submitted by parties, and doed not itself engage in any raid action in the UAE.

In the general practice of administrative raids, officials do not seize goods unless they are counterfeit. This does not apply for competition cases. Officials can request documents or information from the entity’s representatives. The officials do not seize property, documents, emails or computers, but they could require access to such. If the entity refuses to provide such access, the inspectors indicate this in the minutes of the raid report, which would be considered when ruling on the complaint. However, when there is criminal conduct, the police can confiscate laptops/computers and refer the same to a criminal laboratory for assessment and the collection of evidence.

The UAE is not privy to the concept of documents possessing legal privilege; any information obtained by way of a raid would not be considered inadmissible.

In practice, the Competition Committee normally reviews complaints, responses and evidence submitted by parties, and does not itself engage in raid actions in the UAE.

The relevant onshore laws in the UAE are silent regarding the preservation of documentation. Spoiling documents would have little practical significance in the UAE as no similar discovery rules exist in common law systems.

Under the jurisdiction of the DIFC, the spoliation of documents with the intent to obstruct regulatory bodies is considered a serious breach of conduct, but this is an exception for a free zone area and will be irrelevant to cartel matters.

If a dawn raid is considered necessary in competition activity, it would usually involve the inspection of products, and the request for copies of records, documents and data. The seizure of equipment, such as computers, is unlikely.

The raid could also involve the questioning of employees, owners or representatives at the time of the raid if doing so is deemed appropriate by the relevant authorities. If criminal proceedings are involved, an arrest order could be issued for a representative, with the posting of a bond/personal guarantee to discharge the arrested person being permitted.

If an entity refuses to co-operate with a dawn raid commissioned by an administrative authority, further sanctions and escalation could happen by way of referral of the issue to the public prosecution office for a criminal proceeding.

As a matter of practice in administrative and/or police raid actions in commercial issues, employees, officers or entity owners have the right to call and bring in their in-house counsel or external counsel to observe the proceedings, to attend further follow ups, meetings or sessions with the administrative authorities and police and to provide comments, statements and memos. However, investigations at the public prosecutor level with personnel such as directors, officers or owners could have some restrictions on either attendance or speaking, based on the public prosecutor’s discretion and mandate.

There are no such requirements in the UAE system for cartel and competition issues.

Generally speaking, defendants are advised to:

  • raise clear and direct objections to any cartel behaviours;
  • refuse any accusation of a breach of the UAE Competition Law;
  • request a review of the complaint and supportive evidence submitted by the complainant; and
  • seek an independent expert opinion to determine the market position, provide an assessment of activity and/or advise on economic concentration issues.

The Competent Authority has broad investigative powers and can compel any individual concerned to provide testimony in relation to the complaint. Failure to comply can prejudice the individual's position and affect the final outcome. However, and as explained earlier, the Competition Committee usually works to find a common solution to the issue, and parties – namely defendants – attempt to co-operate to meet requirements with flexibility, in order to contain the issue.

If the interview or meeting session is requested by the Competition Committee, minutes of the meeting are prepared to record all statements and defences. If the matter is referred to the police and the public prosecution for criminal investigation, the accused and/or witnesses can be called on to provide statements to assist with the investigation. These interviews are conducted in Arabic, but the individual would have access to an appropriate translator if necessary. The contents of the interview would be required to be documented and signed. If an individual fails to attend an investigation with the public prosecution, the authority could respond by issuing an arrest warrant or referring the issue to court directly for a ruling in the absence of the accused party. This may result in a travel ban and many other sanctions and/or measures in the interim.

The Competent Authority can request any type or form of information, at its discretion, within the permitted timeframes as prescribed by the UAE Competition Law. There is no expectation that all information, irrespective of form, will be handed over to the relevant authorities upon request. In practice, officials do not request any information or document that does not relate to the issue in question.

An entity would only be required to disclose evidence if it was relying on it for the purposes of defence or if it formed part of their claim, or based on requests from officials in relation to the case.

In the onshore jurisdiction of the UAE, there is no express provision pertaining to the concept of attorney-client privilege. Under Islamic Principles and the Advocacy Law (UAE Law No. 23 of 1991), attorneys owe a duty of confidentiality to their client, but this does not equate to the common law concept of legal privilege. Accordingly, communications with in-house counsel are unlikely to attract legal privilege. However, as an employee of the company, the in-house counsel would have their own duty of confidentiality to the employer, based on labour law and other provisions. Contractually speaking, attorneys commit in their engagement letters/documents to maintain the confidentiality of information and documents as appropriate. In practice, attorneys are not required or asked to provide information or documents obtained from their clients, and this a customary rule that law enforcement authorities adhere to and maintain in reviewing disputes.

In contrast, if the entity in question was incorporated in the DIFC, which is a free zone located in the UAE, they could invoke the concept of attorney-client privilege in accordance with the ethics of the courts of the DIFC. These guidelines are more akin to those in other common law jurisdictions, and define privilege as "the right of a party to refuse to disclose a document or to produce a document or to refuse to answer questions on the ground of some special interest recognised by law."

Therefore, if the entity was able to establish jurisdiction in the DIFC by way of origin, they would be able to benefit from attorney-client privilege. However, the attorney is subject to the rules of their home jurisdiction, so the application of privilege would depend on that home jurisdiction. There is no specific procedure in place for how privilege would or could apply to in-house counsel at this time under the laws and guidelines of the DIFC.

The privilege of self-incrimination is not recognised under UAE law and will not be a permitted excuse against compliance. Common law privileges are generally not recognised in the UAE.

In a less relevant topic, the UAE Penal Code states that every public servant who is in charge of detecting crimes or apprehending criminals but neglects or remits to report a crime that came to their knowledge shall be sentenced to detention or to a fine. Exemption to this may be granted if the public servant is the spouse of the criminal, one of his ascendants or descendants, one of his brothers or sisters, or his in-laws who are related to him with a similar degree of affinity. This can give some privileges in a very narrow situation.

As mentioned earlier, criminal proceedings are not pursued in the UAE so the above answers remain a theory based on the general provisions of the UAE regulations and laws.

The Competition Committee would address this failure in its report and conclude its decision accordingly. Referral to the public prosecution for criminal proceedings will indicate this failure and will be addressed accordingly.

In the UAE, as a Civil Law jurisdiction, any documents or information obtained in the course of an investigation will not be made available to the public and would be used strictly for the purpose of the investigation. If the matter is later referred to a criminal court with an accusation order, the parties can request copies of documents and investigation evidence. This could expose all documents submitted in the proceeding to becoming accessible to the public.

On another hand, it is worth mentioning that Article 15 of the UAE Competition Law requires the Competent Authority, the Competition Committee and the Ministry to exercise discretion with all information received in the course of their role, unless specifically authorised or obliged by law.

In response to a cartel investigation by the Competent Authority, the defendant has the opportunity to submit their defence, views and observations concerning the allegations and the subject matter of the complaint before any report is issued by the Competent Authority to the Ministry, within ten days of receipt of the allegations. If the Competent Authority is convinced by the legal and factual arguments raised by the defendant, it will either inform the Ministry that there is no need for further escalation of the matter, or request further information and/or evidence to substantiate the defence claims.

Prior to any decision being reached, there is also the opportunity for the target to obtain reconciliation, if the circumstances permit.

Should the matter be referred to either the civil or criminal court, the defendant and defence counsel will have further opportunities to submit their memorandums and supportive evidence. An expert may also be appointed to investigate the matter and make a recommendation, on a factual basis in accordance with their industrial or technical expertise.

There is no particular amnesty regime available in relation to violations of the UAE Competition Law. However, the penalties and sanctions imposed by the Competent Local Courts in the UAE in relation to anti-competition practices would be subject to General Amnesty or Special Pardon, in accordance with the provisions of the UAE Penal Code. Pardons from sanctions are normally issued by the UAE President and require special formality and pardon procedures to be filed after the final/binding decision is issued in relation to complaints. This is unlikely to be pursuable for competition criminal charges.

General Amnesty for crimes or specific crimes, according to the UAE Penal Code, shall be granted by an ordinance/law, and shall involve the lapse of the criminal action or the quashing of the conviction, considering all such crimes as non-existent, and the abatement of all principal and accessory penalties and criminal measures, without having any effect on penalties and criminal measures that have previously been executed.

Special Pardon refers to a General Amnesty ordinance/law that has been enacted for part of the penalties. The Special Pardon shall be granted by a decree and shall involve the abatement of the penalty awarded by a federal judicial authority in whole or in part, or shall be commuted for a lighter penalty prescribed by the law. The Special Pardon shall not involve the abatement of secondary penalties or other criminal effects or criminal measures, unless the decree provides otherwise. Furthermore, the Special Pardon shall have no effect on penalties previously executed.

In light of the above, the penalties and sanctions imposed by the Competent Local Courts in the UAE in relation to anti-competition practices would be subject to General Amnesty or Special Pardon only if the anti-competition practices are covered and included under the General Pardon Ordinance and/or Special Pardon Decree in the UAE.

For leniency on penalties, the "Competent Court", which is the First Instance Federal Court in the UAE, can rule on this based on the circumstances, and decide on imposed sanctions. For instance, youths with full legal capacity – ie, not juveniles or minors – are considered in criminal proceedings where courts attempt to impose penalties with leniency (ie, at minimal statutory provisions or maybe less). The court would also consider the history of the defendant regarding criminal offences, the implication of violations and other circumstances prior to imposing penalties for violations.

The investigating authority is entitled to seek information directly from company employees by way of interview. The powers conferred to the Competent Authority are broad, and explicitly provide that information can be obtained by any measures deemed appropriate in order to investigate the complaint, including holding meetings with the parties to the complaint.

The investigating authority is permitted to request any documentation in writing if it feels it would be useful to the investigation, providing the requests are submitted to the defendant and/or complainant within the prescribed time limits as set out in the UAE Competition Law. The statute and regulations are silent on what happens in the case of non-compliance in cartel issues, but it is likely that the Competent Authority would consider this breach in its final resolution.

In terms of document disclosure, there is no obligation for an entity to provide any document it feels would be damaging to its case, and usually an entity would only submit the documents upon which it wants to base its defence. That being said, the failure to provide information that has specifically been requested could have a negative impact on the perception of an entity and the final resolution.

The UAE Competition Law provides that the Competent Authority may take any action it considers necessary to investigate competition complaints. This wording provided under Article 12 of the Law could be interpreted to include co-operation with official authorities in the UAE or other jurisdictions.

In practice, this does not often take place, and whether any information was shared with the UAE enforcement agencies would depend on the territory in question. However, through ongoing negotiations for more co-operation with other nations, such as India, it would seem there is a willingness for the UAE to work with other jurisdictions and enforcement bodies in the future. Letters can be addressed and inquires can be made based on the parties’ requests.

Article 14 of the UAE Competition Law states that the Ministry of Economy shall enact its laws and regulations in full co-operation and co-ordination with the official authorities in the UAE to address any form of activities or practices that violates the provisions of the UAE Competition Law. Investigations will be conducted in unison with official authorities and regulatory bodies in order to sufficiently supervise competition practices.

Furthermore, the Ministry of Economy shall co-ordinate the implementation of the provisions of the Law with the Competent Local Authorities and Sectoral Organizational Bodies (Federal or Local Bodies empowered by virtue of their respective regulations to regulate, control or supervise a certain economic sector in the UAE). Accordingly, the Ministry of the Economy has wide powers to request the co-operation of any official authorities in the UAE in relation to running the investigations or any procedures related to activities or practices that violate the provisions of the Competition Law in the UAE.

Upon interpretation of the applicable laws and regulations, the Competent Authority and other regulatory bodies are permitted to co-operate with foreign jurisdictions if they consider it necessary. However, this is not so common in practice and would be dependent on the relationship conditions between the UAE and the foreign jurisdiction.

As mentioned above, the UAE has been negotiating enhanced co-operation with several territories, such as India, where an agreement was recently executed. The practical effects of such agreements are yet to be seen, but it is expected that they will act as a deterrent measure and result in a more global perspective on enforcement.

Criminal proceedings in the UAE are generally vigilant and modern, meeting the standards of best international practice. In cartel activity, the Ministry of Economy can decide to refer the issue to the public prosecution office for investigation and address criminal accusations against the violating party. This route is unlikely to be taken by the Ministry in competition matters, as indicated earlier.

Based on general practice in criminal proceedings, the public prosecutor will receive the file from the Ministry and address charges based on the evidence provided. The accused entity will be called to provide a statement and evidence, to hear allegations and requests to run more investigation against third parties, or to hear from directors, officers or owners as appropriate, and to present its defence in full.

The public prosecution office can thereafter decide to run a further investigation and to call for more individuals to attend for testimony, statements or investigation. The decision will be either to reserve the matter and close the file for lack of criminal conduct, or to issue an accusation order and refer the issue to the criminal first instance court.

Civil cases pertaining to cartels are litigated before the UAE Competent Civil Local Court. The Federal Court will have jurisdiction if a governmental body is involved as a party – ie, the Ministry of Economy / Competition Committee or Department. The UAE Federal Court has the default jurisdiction to review administrative decisions issue by Ministries and federal governmental agencies in UAE.

The evidence in such a case is presented to the UAE Federal Court in the form of written submissions and annexes.

The defendant cannot require or obtain relevant information prior to the case if such information has not already been shared with them. However, the defendant normally receives full copies of the complaint and evidence related to the dispute, to enable them to respond to the complaint. The Competition Committee can exclude any information that does not relate to the dispute or case from being shared with the defendant.

Enforcement actions involving cartels are typically brought against one party per proceeding. If two parties are directly associated, affiliated or connected to the cartel behaviour, it is possible to join both parties in the proceeding. Generally speaking, the plaintiff can include several defendants in the same proceeding, which is an advisable strategy if the case relates to the same incident/behaviour, in order to ease the progress of the proceeding and its findings. Therefore, where two parties are suspected of collusion, the complainant would be able to bring an action against the parties in a joint action.

As per Article 1(1) of the UAE Evidence Law, the onus is on the claimant to prove their case.

In the context of cartels, the burden of proof would rest with the claimant, whether they were private or governmental, to prove the violating conduct of the defendant, especially when claiming damages and other monetary remedies. Experts can be delegated by the court to search and find out the basis of damages and to support parties with their findings, claims and defences.

Initially, the finders of fact in a cartel investigation would be the Competent Authority and the Ministry, who are authorised to utilise experts or consultants to investigate the matter. Once the Ministry has reached its decision, its decision may be either escalated or appealed by the defendant to the court.

In the UAE, under the civil law system, the judiciary are responsible for concluding the facts of a case, by reviewing the written pleadings of each party involved in addition to the evidence provided. Once the overarching factual basis of the matter has been set out in writing, the judiciary will appoint court experts to assist with investigating further and assessing the information provided by each party. Typically, the expert will meet with each party, consider the evidence provided and request further evidence that they believe may be important to establishing the factual basis of the case. The expert can request copies of documents for its investigation but cannot force a party to produce a document, in accordance with the provisions of Law No. 10 of 1992 regarding the Law of Proof under civil and commercial transactions. The expert will then issue their report to the judge, based on their findings. The judge will then review the facts of the case and the opinion of the expert or experts (depending on the complexity and nature of the matter) and will then apply the law to the facts.

It is important to note that the judge in each case is not bound by the precedent of a higher court, even if the facts can be considered similar.

There is no restriction on evidence obtained in one proceeding being used in other proceedings, unless the court explicitly mentions or determines some evidences/documents as being confidential.

Evidence from foreign jurisdictions can be presented, and can be used to prove some facts, such as judicial declaration or admission by the parties. However, courts are not required to follow or affirm what other foreign courts found; therefore, the decision on whether or not to rely on such materials needs to be assessed on a case-by-case basis.

The claimant is required to prove their claim, while the defendant must disprove it. Any evidence submitted to the court must be relevant to the case and must be admissible. There are no specific limitations on the form of evidence, but evidence would typically include documents, witness testimonies and expert opinions.

The Law of Evidence in the UAE provides that the Competent Courts may assign court-appointed experts to provide their opinion on any matter the court considers necessary. This usually relates to more technical matters requiring specific expertise. In practice, local courts rely heavily on expertise to review and advise on commercial and civil disputes.

As per the relevant appointment procedures, the expert must review the relevant information and conduct meetings with all parties involved in the complaint. Once in receipt of this information, the expert will prepare a report to submit to the court. The report will usually be held in favour of one party.

The parties to the dispute will then be provided the opportunity to comment on the contents of the expert report and its findings before a decision is issued by the Competent Court. The expert's findings are not binding on the judge, but they are often considered persuasive. Furthermore, the judge has the discretion to appoint more than one expert to a case if they consider it to be necessary, or if there was a justifiable objection to the contents of the initial report by either party.

The UAE does not legally recognise common law privileges in relation to evidence in the mainland jurisdiction.

It is possible for two or more proceedings to run simultaneously, involving the same or related facts, in which case it may be possible for a party to suspend the proceedings of one proceeding, pending the resolution of another.

The Competent Authority has the authority to investigate any violations of the UAE Competition Law if it has reasonable grounds of suspicion. The Competent Authority will then prepare a report for the Ministry, providing a recommendation and, if necessary, the Ministry will either impose an administrative sanction itself, or will make a referral of the violations to the Competent Court.

If a defendant wanted to challenge the decision of the Ministry to impose a sanction, they would need to appeal to the Competent Court.

The procedure for establishing settlement in the UAE is entitled reconciliation and is provided for under Article 15 of the implementing regulations concerning the UAE Competition Law.

The Ministry may permit the reconciliation of the anti-competitive act in question, provided that reconciliation is settled prior to a referral to the public prosecution. Settlement can be achieved in consideration for payment of an amount that is no less than double the minimum penalty prescribed in the UAE Competition Law. The reconciliation must be in writing and signed by the entity that has been proved to have violated the provisions of the UAE Competition Law and Regulations.

Once the reconciliation has been executed and the evidence of payment has been submitted to the Ministry, the reconciliation shall be binding on the parties involved. If the entity fails to make the appropriate payment in accordance with the reconciliation terms, the Ministry will refer the matter to the Competent Court in the UAE.

Reconciliation will not be a permissible option for any acts that relate to the illegal disclosure of information, as set out in Article 5 of the UAE Competition Law.

If a party executes a reconciliation agreement, they are effectively admitting implied responsibility. There is no statutory guidance provided as to whether they would be exempt from bidding for government contracts in the future and the contents of the reconciliation agreement are not specified by law. Therefore, based on local practice, there should be no limitation on officers or companies participating in governmental bidding processes.

On another note and if a settlement agreement is signed, parties can try to include some statements to mitigate all assumptions and introduce other considerations for such settlement which can be used.

The sanctions imposed by the UAE Competition Law are set out under 4.5 Sanctions and Penalties Available in Civil Proceedings.

Under the Competition Law, penalties are predominantly financial and, as per Article 16, there is a fine of no less than AED500,000 and no more than AED5 million for firms that enter into restrictive agreements and those that abuse their dominant position, in contravention of Articles 5 and 6 of the UAE Competition Law.

As per Article 17, if the offence committed is in contravention of the provisions relating to economic concentration, the fine will be a minimum of 2% and a maximum of 5% of the entity’s annual revenue.

In the case of a repeat offender, Article 21 provides that, in the context of the UAE Competition Law, they will be fined double the recommended fine.

Failure to observe the obligations related to confidential information, in contravention of Article 15 of the Competition Law, will be subject to a fine of a minimum of AED50,000 and a maximum of AED200,000.

Other sanctions, provided for under Article 22, include the closure of an entity for a specified period of up to six calendar months. This order is subject to a court conviction. If a court decision is issued against the defendant, the decision will be published in a minimum of two daily newspapers, which could damage the entity's reputation.

In some circumstances, the defendant may be required to provide financial compensation to a party concerned, which has sought damages in light of the defendant’s breach.

A company's "effective compliance programme" is irrelevant and will not be considered when investigating or addressing cartels behaviour in the UAE.

In cartel behaviours, sanctions are statutory and determined in the law. If an effect resulted in genuinely undermining consumer interests, the consumer protection department can address other violations against violators, sanctions for which are usually fines. Redress of consumers is not possible unless there is a material object that can be redressed, such as the recall of products, etc. In anti-competitive behaviour, the laws grant sanctions against violators, and corrective measures.

The parties have the right to appeal Ministry of Economy decisions in cartels cases up to all level of courts– ie, First Instance Court, Appellant Court. They can also seek a review all the way to the UAE Federal Supreme Cassation (similar to certiorari), providing their grounds are based on a point of law and not on the substantive merits of the case.

The UAE Federal Supreme Court is the highest court of appeal in the UAE and is comprised of five judges. Once the decision has been issued by the Supreme Court, there is no further opportunity to appeal the decision, nor is it subject to judicial review.

A private right of action or enforcement of the Competition Law is made available in accordance with the UAE Competition Law articles, which grant any party or entity that has suffered any damages due to a violation of any provision of the UAE Competition Law the right to claim compensation from the courts in the UAE by stating that the “penalties set out in this law shall not prejudice the right of the harmed party to have recourse to the Court to claim compensation for the damages arising from violating any provision of this law.” The standing to file such civil cases exists.

Furthermore, it is possible to file a complaint to the Competition Committee, in order to bring any violation or misconduct in the local market to their attention, or to bring any conduct influencing competition. The complainant may or may not be part of the proceedings, as the Competition Committee may rule and find suitable. The Competition Committee can provoke, investigate or open a case from its end to rule on any cartel behaviour.

The courts of the UAE do not permit class or collective actions. However, many plaintiffs can join a legal proceeding and file joint actions.

The passing-on defence is not regulated nor mentioned in the UAE Competition Law or Civil Code, but according to general liability rules under the UAE Civil Code, the plaintiff’s action to claim damages will likely be dismissed if there is proof that no damage occurred, or if there is adequate evidence that such damage was adequately compensated.

The passing-on defence will likely help the defendant to minimise the impact or outcome of sanctions if the issue is investigated by the Competition Committee. It will also help the defendant to reach a settlement and close the case amicably.

The evidence obtained by governmental investigations in relation to violations of the UAE Competition Law is strictly confidential, in accordance with the obligations set out in Article 15, unless specifically authorised or obliged by law.

As explained above, the UAE Ministry of Economy works closely with parties to resolve their cases amicably and reach settlement. It works with this policy as a first option to ensure the smooth continuity of business and commerce within the UAE. As far as is known, no cases have been escalated to the public prosecutor by the Ministry for violation of the Competition Law and regulations. Similarly, no civil actions have been filed based on cartel behaviour, as cases are usually referred to the Competition Committee to review conduct, deals and behaviour, and to impose administrative sanctions and/or any other ruling based on investigations.

A successful attorney's fees are granted at a minimal rate; there is no grant for actual attorney fees.

Unsuccessful claimants are obliged to pay nominal amounts in legal fees, which typically would not exceed USD1,000, irrespective of the fees incurred and the associated claim amount. Actual attorney fees are not usually granted nor expected to be awarded in cartel cases. However, in some precedents issued by local courts, the plaintiff has received a reward for actual attorney fees if said fees are included in the direct damages claims and if there is proof that the defendant acted in bad faith and/or in violation of laws in some topics, such as trade mark or intellectual property infringement cases.

Decisions involving private civil litigation are not subject to review. The complainant has the right to appeal any judgment issued up to the Court of Cassation, if they are appealing on an error in law or procedure. Once the decision has been issued by the Court of Cassation, there is no further opportunity to appeal the decision.

The UAE Competition Law and implementing regulations are very comprehensive and explanatory. Also, there are some guidelines, handouts and guidance brochures to explain those regulations, such as complaints procedures and outcomes followed by the Competition Committee. Physical copies of these guides can be obtained from the Ministry of Economy offices when available.

The Competition Committee prints and releases some guidelines, explanatory notes and handouts to inform about their regulations, rules, the process of complaints and sanctions. Such material is prepared and printed to educate the public about cartel behaviour. Decisions and/or cases are handled on a confidential basis, with no publications made.

The Competition Committee is placed within the Competition and Consumer Protection Department at the UAE Ministry of Economy, whose website (www.economy.gov.ae) could include some information about the authority, although not much can be found or related to Competition Department services.

Monitoring and investigating cartel behaviour is not considered a top priority at this stage of the COVID-19 pandemic. The exceptional financial circumstances resulting from the pandemic have led to unprecedented decisions by the government, which in turn have led to amendments to the labour laws, the reduction and/or waiver of official fees and expenses, the provision of government support to dynamic sectors, and other related measures. During the period of COVID-19, decision makers expect that some entities will need to take critical decisions in order to survive, such as merging and/or acquiring other entities. The decision makers recognise that mergers and acquisitions can be a useful way for entities to preserve market positioning, to maintain employees, to avoid bankruptcy, to fulfil their commercial obligations and to assist creditors to ensure the recovery of debts.

As may be expected, the Ministry of Economy and associated departments are more focused on creating stimulus and reviving the local economy after the difficult times entities have experienced due to unforeseen closures and other associated measures. Nevertheless, one response to a downturn in business activity has been to engage in mergers and acquisitions, particularly in those sectors that are more likely to be affected by the circumstances. For instance, two large arrangements occurred in the UAE during the pandemic: the first relates to two high net worth property development companies that own a large number of developments and tourist destinations in Dubai, while the second merger deal relates to two major online platforms that could be viewed as controlling a large share of their market in the “online real estate brokerage” sector, especially considering that the platforms together will be valued at over USD1 billion (as per the announcement).

The deals were only announced recently so the outcome or involvement of the Competition Committee in reviewing, approving or investigating the deals is not yet known. However, the deals are not anticipated to have or attract any adverse reaction from the Competition Committee. Upon assessment of the mergers, the view could be to break the platform activity down into the constituent industries in which they function – ie, “real estate brokerage” in general. The assessment would then be made on whether the platform dominated the real estate brokerage industry as a whole, taking into account all other factors. This was the approach when the well-known “Uber and Careem” acquisition in March 2019 was announced. Therefore, it is anticipated that the described mergers are compliant with the current laws and regulatory frameworks described in the contents of this article. 

BSA Ahmad Bin Hezeem & Associates LLP

Level 6, Building 3
Dubai International Financial Centre (DIFC)
The Gate District
PO Box 262 Dubai
United Arab Emirates

+971 452 855 55

info@bsabh.com; Munir.suboh@bsabh.com; www.bsabh.com
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Law and Practice

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BSA Ahmad Bin Hezeem & Associates LLP has expanded greatly since its launch in Dubai in 2001, and now has nine offices throughout the Middle East. The firm has a reputation for delivering high-quality legal services and has become a “go-to” option for magic circle firms seeking advice and guidance on local laws. The firm's lawyers, advocates and legal consultants come from a diverse range of backgrounds, with the majority being bilingual in languages such as English, Arabic and French. Key practice areas include arbitration and dispute resolution, banking and finance, commercial, construction, corporate and M&A, cybersecurity, employment, energy, insurance and reinsurance, intellectual property, litigation, restructuring and bankruptcy, real estate, tax and VAT and technology, media and telecoms.

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