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THE KNOWLEDGE
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BUSINESS IN DUBAI
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Legal systems in the Gulf are usually quite complicated and those unfamiliar with their workings can find this very difficult. The fact is that these systems are completely different to those in the west with a whole different language, which makes it worrying for those who want to transact in business in the UAE and the Gulf states.
Although these systems are different, the basic legal principles and structure are logical and understandable. They have evolved over many centuries, in a similar way to the West and, especially in the UAE, are adapting to the changing needs of society with new developments in thinking for a modern age. More changes in commercial law have liberalised legal regimes, creating a more open and understandable environment for foreign businesses and investors.
The basis of all legal systems in the the UAE is Sharia or Quranic Law. In the constitutions, Islam is identified as the state religion as well as the principal source of law. However, although the principles of Sharia influence criminal and civil laws,
the direct influence of of Sharia in the UAE is primarily confined to social laws, such as family law, divorce or succession.
Most commercial matters are now dealt with by either civil courts or permanently established arbitration tribunals.
There are several core principles of Sharia which apply to business transactions
and which have influenced the development of commercial codes that apply in the UAE. Although these concepts don't directly translate into commercial codes (although they may do in Islamic finance), they have exerted an influence over the drafting and interpretation of these laws. These are:
1. Usury or charging of interest (riba) is forbidden)
According to Sharia, money is not a commodity, that can be traded, nor does it have a
value over time if left unused. Therefore interest earned is an unjust income.
2. Risk should be shared
As income can not be derived from interest payments, investors should share in profits or losses of an investment in proportion to the amount that the put into the transaction, and thus the level of risk they undertook.
3. Uncertainty (gharar) in a contract is prohibited
Both parties must undertake a contract with full knowledge of all the terms. This means that the amount of capital or goods should be agreed in advance and stipulated in the contract.
4. Competence
As is the case in most legal jurisdictions, the law also specifies that the parties in a contract must
possess the legal capacity to understand and assume the obligations of the contract.
5. Consent
The parties to a contract should enter into it of their own free will and should not be subject to coercion or duress.
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