President issues federal law on netting

President His Highness Shaikh Khalifa Bin Zayed Al Nahyan has issued Federal Decretal Law No. 10 of 2018 on Netting,

Netting entails offsetting the value of multiple positions or payments due to be exchanged between two or more parties. It can be used to determine which party is owed remuneration in a multiparty agreement.

The provisions will apply to all qualified financial contracts, netting agreements specified under this law or collateral arrangement.

This decretal law does not apply to financial free zones and financial institutions licensed thereby to the extent where there are similar legislations governing similar cases referred to in this law. The promulgation of this law is also aimed at strengthening the legislative framework for the settlement of obligations arising from qualified financial contracts through set-off, offset, or net out obligations.

“The new law shall lead to reduction in credit and settlement risks and increases the effectiveness of its regulatory procedures, inclusive of safeguards related to netting. This in turn shall strengthen oversight and governance frameworks, improve the performance of the national economy and attract more foreign investment for the state,” said Shaikh Hamdan Bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance.

Netting shall include cases of termination, liquidation and/or acceleration of any payment, obligation to deliver entitlement or obligation to make, receive or require payments or deliveries, under a Qualified Financial Contract.