Jacques Visser became chief legal officer at the Dubai International Financial Centre Authority in September 2015. The financial hub, set up in 2004, now has more than 2,100 registered companies and a workforce of almost 24,000 - but it recently underwent some changes. Last month Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, enacted new insolvency and employment laws for companies operating at the centre. The insolvency law came into effect on June 13 with the employment law set to go live on August 28. The DIFC is also replacing the end-of-service gratuity with investment plans from January 1 next year. Here, Mr Visser reveals more about the changes taking place.
There are a lot of changes at DIFC. Why now?
These things don’t happen overnight, so there’s really no specific answer to the why now. The employment law, for example — the amount of research benchmarking, going back and forth with a number of representatives both from an employer and employee perspective, lawyers that practice in employment law — the whole process of actually getting this law to enactment probably took about three years.
If you look at the insolvency law, the first time that we went out and did an international benchmarking exercise and did a gap analysis with our own legislation … that process started in June of 2017.
If you look at the proposed changes to the end-of-service benefits regime we want to replace with a savings scheme, the first time the governor scoped out the objectives and the deliverables to the special working group ... was probably sometime towards the end of 2016.
It’s not as if all of a sudden, we’re sitting here and saying, ‘we need to change, we need to do things differently’. This is a long and hard look over years.
The new DIFC employment law replaces a 2005 law. Are these the first changes?
Changes were also made in 2012 and now there’s a brand new law … but about 90 per cent of it is exactly the same. Legislation is not necessarily something you want to change that often, the reason for that being legal certainty.
Why have you added a limitation period for employment claims?
In most developed countries, there is a very short period of time that employee-employer related disputes can come to court. Without a limitation period imposed, people can wait up to six years to bring a claim. If six years after the fact, an employee comes and says ‘I’ve been discriminated against,’ the chances are that the people involved in that are not even in the firm any more. So, once again based on a global benchmarking exercise, we decided to impose a 180-day or six-month limitation period.
Penalties for not paying end-of-service benefits on time have also altered. Why?
There was this much debated article 18.2 penalty, where if you as an employer did not pay somebody their full dues within 14 days of termination — you could be Dh1 short — you then were liable to pay a penalty for the late payment and it was not in any way linked to the amount outstanding. For every single day that you’re late, a penalty accrued equal to your daily wage. What we found is that a lot of people abused that situation and waited as long as they could for the penalty to accrue.
So we changed that system. We still say there’s a penalty. We don’t want employers to think they can just not pay people and get away with it, but what the law says now is that it should be at least in excess of a week’s wages. The court also now has the discretion to waive the penalty in certain circumstances, particularly where it’s not reasonable or the employee was actually the cause for the delay.
How have sickness allowances changed?
Our law makes provision for 60 working days, which is 12 weeks, which is more or less 90 calendar days, so in practical terms it’s essentially the same thing. For those full 60 working days previously people were paid full pay. What we’ve done is, from a minimum standard perspective, we’re only giving full pay for the first 10 days, we’re giving half pay for the next 20 days and there’s no entitlement to pay for the last 30 days.
The reason we’ve done this is that it was a system very much open to abuse. People would take sick leave for minor reasons, knowing that they basically have another 12 weeks a year to do so and they can do so at full pay. There are some states in the US that only allow for two-and-a-half days at full pay. So it was a very, very royal allowance in global terms.
What prompted the decision to introduce paternity leave?
If you are now a professional, an investment banker, or someone working for one of the big consultancy firms or law firms … people in other comparable jurisdictions would already have paternity leave. Now that we actually have discrimination provisions that have penalties applied to them, we couldn’t just be silent on fathers. We felt that from a discrimination and a fairness perspective, you should give five days — that came from global standards.
Why were age, maternity and pregnancy added to the anti-discrimination clause?
The fact we did not have that previously was a gap in our law and we wanted to address that. You shouldn’t discriminate against somebody when they’ve just had a baby, you shouldn’t discriminate against somebody because he’s over the age of say 55 if he still does his job properly. The employer can still put restrictions on certain jobs, if he’s pursuing a legitimate aim.
How has the DIFC community reacted to the scheme set to replace the gratuity?
The reaction has been overwhelmingly positive. We’ve obviously done an internal survey and almost 80 per cent said they’re in favour. If you look at it as an employee, your money is now secure. That money will be paid as contributions by employers into the scheme on a monthly basis. Where previously that money was just a dead number, it’s now something that actually goes into a fund where it is invested in very low-risk, passively managed index funds. It has the opportunity to grow. Plus we give employees the voluntary option to save on top of it.
Employers on the other hand get to fund it in a way that is completely predictable. The problem with the benefits scheme that we have now is that you don’t know what you have to pay the employee when he leaves and you don’t know when he’s going to leave. Your payment is actually cheaper and you relieve yourself of the obligation now, as opposed to some unknown obligation in the future.
The fact that employers make contributions into these schemes is a key selling point. That’s what people are used to in other jurisdictions — your national insurance payment if you’re in the UK or your 401K if you’re in the US. This is the type of thing that is always part of an employment relationship and the fact that we don’t have it here is a huge gap.
Are DIFC's new laws, especially the insolvency law, related to the collapse of Abraaj?
The analysis we did in relation to the insolvency law started in June of 2017 and was completed in about October of 2017. That is when we basically had the recommendations of what ultimately became the new insolvency law and regulations. So our thinking, our way of having dealt it was conceptualised long before Abraaj became a problem.
The second thing is that if you look at the details of Abraaj … every single thing that has gone wrong within the context of Abraaj happened at the Cayman Islands level — Abraaj holding, Abraaj Investment Management Limited. If you look at the indictment … I think in the 78 pages of that document, there’s only one mention of the DIFC or the DFSA (Dubai Financial Services Authority) and that’s in relation to Abraaj Capital Limited, which was just a subsidiary in the bigger scheme of things and only a sub-adviser on four of their 30-plus funds. So everything that went wrong in the form of the allegations of misconduct, mismanagement, now allegations of racketeering and securities fraud … all of those things happened at Cayman Islands, Abraaj Holding, Abraaj Investment Management Limited level.
Also when Abraaj went into liquidation, those liquidation proceedings were instituted and granted in the Cayman Islands courts. And the process currently being followed is in the context of the insolvency laws of the Cayman Islands.
This new insolvency law ... is one of the most sophisticated and user-friendly and flexible debt relief laws created globally. The only other jurisdiction that has a comparable type of regime is Singapore. One of the key things that we did in the law is we also incorporated the United Nations Commission on International Trade Law (Uncitral). Uncitral brought out model requirements on cross-border insolvency and we have now imposed those requirements into our law. So in theory what can happen is that now that we have that, a Cayman Islands court or a US court can actually have much quicker access in our jurisdiction.
How is DIFC helping former Abraaj employees get payments owed to them?
In terms of our law and our requirements, the remuneration payable to employees is a preferred claim in liquidating a company. So typically they get paid their dues before anyone else, but it’s ultimately up to the liquidator in sitting down after everything has been tallied up and everything has been liquidated and assuming that there is a pool of cash available, they would then be the preferred creditor. Also, having been employees under the DIFC Employment Law, obviously if there are amounts which they think are due to them, they have access to our small claims tribunal.