Reissue of the Federal Trust Law

On September 25, 2023, His Highness the President of the United Arab Emirates (“UAE”), Sheikh Mohammad Bin Zayed Al Nahyan, issued Federal Decree-Law No. 31 of 2023 related to trusts. This new law repeals the old law No. 19 of 2020 that previously governed trusts, was published in the official gazette, and is now in effect.

All provisions within the previously issued regulations and decisions related to trusts remain valid to the extent that they do not contradict the new law.

The new law incorporates amendments to several existing provisions with the aim of providing greater clarity and addressing shortcomings identified in the practical application of the law. Additionally, the new law introduces a regulatory framework for the administration of trusts at the Emirate level.

Registration of trust

The new law establishes a trust registration process before the competent government authority in each Emirate. It also mandates the issuance of a “validity certificate” and an “incorporation certificate” by the competent authority for any trust to be established under the law. Once the preliminary registration procedure is completed, the trust is considered established and gains legal personality. Any subsequent amendments to the trust will only take effect following its registration with the competent authority.

Validity, independence, and recognition of trusts

The new law grants recognition to trusts in all Emirates, regardless of the location of the trust’s assets. It retains the concept that a trust possesses a separate legal personality, and thus, the trust itself holds legal title to the assets conveyed to it.

Reinforcing the powers of the settlor and trust protector

The new law provides more specificity regarding the various roles that the settlor and trust protector play in relation to a trust, as well as the role the court should ultimately play in any matters concerning the settlor or trustee’s powers. The trust law further emphasizes that the express terms of the registered trust instrument serve as the binding rules for a trust.

Trustee’s duties and liabilities

The new law offers additional details on the duties and obligations of a trustee and the liabilities of trustees in connection with these duties.

Summary

The new law is a further development of trust law in a civil law context as initially promulgated by the original trust law. We will in due course provide a more detailed analysis of the effects of the provisions. We note that the publishing of the new law clearly demonstrates the UAE government’s continued commitment to provide an onshore alternative to the existing trust laws of the financial free zones, and the law is issued against the backdrop of the government’s continued efforts to support businesses in the region and the overall economy of the UAE.

We note that the law provides for additional implementing regulations and resolutions which will be issued in due course.

How can we help?

We are continually monitoring the development of the legal framework that supports the family business and private wealth sector in the UAE.

At Al Tamimi & Company, we have developed extensive expertise in the family business and private wealth sector. Drawing from our knowledge, we are keen to apply the best practices from Western jurisdictions to the emerging field of trust-related products in the UAE.

Our team of lawyers has extensive experience in successfully advising clients on the appropriate family arrangements that meet their requirements.