New bankruptcy law will draw investment, says DIFC Courts chief

The law gives investors greater clarity over the potential downside risks of investment, said the chief of DIFC Courts.

Mark Beer, the chief of the DIFC Courts, said that the new law gives investors greater clarity over the potential downside risks of investment. Sarah Dea / The National

The new bankruptcy law will make a “massive” difference to the UAE’s ability to attract inward investment, according to Mark Beer, the chief executive of DIFC Courts.

Mr Beer said that the new law gives investors greater clarity over the potential downside risks of investment.

Sheikh Khalifa, the President, on Monday issued the long-awaited new federal bankruptcy law by decree.

Speaking on the sidelines of the Dubai Investment Forum on Tuesday, Mr Beer said:

“If a business has a problem it can come to a court such as DIFC Courts and get speedy resolution, but if it the debtor simply can’t pay its debts, the new insolvency law provides a system that protects jobs, gives certainty and maximises creditor returns.

“When you look at the downside [risk] of investment it includes the risk of bankruptcy. Leading economies provide a regime that allows a business in crisis time to work through its issues and seek new sources of funds, while allowing creditors the certainty of an orderly restructuring.”

He argued that once investors know the scale of returns likely as a result of a business failure, the case to invest becomes much stronger.

“I’m sure that this new law will be a significant catalyst for further investment,” he said.

Mauricio Zuazua, a partner with management consultancy firm AT Kearney, argued that the new law would also encourage greater levels of investment from foreign SMEs.

“The publication of that law is of tremendous impact precisely because the risk of doing business remains with the business. It’s not a personal liability.

“While large corporations may want to take that risk and make measured investments, the small and medium-sized enterprise – the entrepreneur – cannot take that risk. All of the liability becomes his or hers. The law is going to change the ability of the country [in] attracting entrepreneurs, and developing and nurturing the networks needed for entrepreneurs to flourish.”

During the forum, Sami Al Qamzi, the director-general of the Dubai Government’s Department for Economic Development, announced the launch of a new International Sustainable Investment Centre aimed at building a regional network for sustainable investment in the Mena region.

Mr Al Qamzi said that Dubai had attracted Dh17.7 billion worth of foreign direct investment (FDI) in the first six months of 2016, compared with Dh28.6bn for the whole of 2015. Last year, the city ranked sixth globally in terms of the amount of FDI attracted, and fourth globally in terms of the number of new investment projects. It brought 279 new projects to market in 2015 – a 16 per cent increase on the previous year.

“Dubai continues to cement its position among the top FDI destinations in the world,” said Mr Al Qamzi. Mr Beer said that the UAE overall currently attracts 60 per cent of the FDI into the wider Gulf region, and 50 per cent of FDI-related jobs.

“What’s left to play for is US$1.7 trillion of money which is circling the globe looking for a home. We don’t want to capture $1.7tn. We want to capture a proportion of that that adds value.

“There’s two types of FDI. There’s vulture FDI that circles the world and looks for a carcass. It adds no value, no jobs and no intellectual property. It eats the flesh off the carcass and at the first sign of trouble it leaves.

“What we want is the positive FDI that creates wealth and opportunity, that creates jobs [and] adds value.”

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