Law and regulation of Covid-19 loan moratoriums in the UAE

1.1 Is there a moratorium on loans legislation implemented in your jurisdiction?

No.

1.2 If no: Are there any ongoing discussions regarding a potential introduction of such measures?

No. In the absence of legislation, some UAE Banks have taken individual or collective initiatives mostly directed towards individuals and SMEs.

An initiative was launched by 17 financial institutions in the Emirate of Abu Dhabi in cooperation with the Abu Dhabi Department of Finance and the Department of Economic Development, which includes a 50% reduction on associated bank charges, the halting of foreclosures on mortgages and the possibility to defer instalments for 3 months with no additional bank charges for SMEs.

The five major banks in the Emirate of Dubai have announced several initiatives directed mainly at individuals, including the measure that anyone placed on unpaid leave may receive interest-free loans and refunds on costs and charges.

1.3 What is the name of the relevant legislation (the “Relevant Act”)?

See point 1.1 above.

1.4 What is the duration of the measures (period of moratorium)?

See point 1.1 above.

1.5 Does the legislation provide for an extension of the period of moratorium?

See point 1.1 above.

1.6 Is the moratorium mandatory, or can each borrower opt out should they wish to simply continue payments, or opt in if they want to be protected by the moratorium?

See point 1.1 above.

2.1 Is the moratorium available for both corporate and consumer loans?

All the initiatives listed above have been mostly directed towards individuals and SMEs.

2.2 Who are the affected Lenders?

The participating banks.

2.3 Does it make a difference whether loans are granted by a foreign entity and governed by foreign law?

As these initiatives are all voluntary, this is not applicable.

3.1 Is there a cut-off date with respect to loan agreements to which the Relevant Act will apply (e.g. not applicable to loan agreements entered into after the cut-off date)?

No. 

3.2 Does the moratorium apply to principal only, or also to interest and/or fees?

N/A

3.3 Will the maturity of the loan automatically be extended by the moratorium period?

This would depend on the relevant initiative.

3.4 Are repayments and interest which have become due and payable under the contract before the Relevant Act has come into force covered by the moratorium?

N/A

3.5 Will lenders be able to terminate a loan due to an event of default other than non-payment (e.g. breach of financial covenants)?

Loans can be terminated but rights cannot be enforced. The Abu Dhabi Judicial Department issued Circular No. 7/2020 on 27 March 2020 postponing trials during the crisis for 30 days. Temporary court service suspensions have also been announced in Dubai, with all hearings between 22 March and 16 April being postponed to later dates. Although court hearings were resumed remotely on 19 April 2020 in Dubai, enforcement proceedings in relation to all rental property eviction cases and execution procedures related to civil cases (including the capture, seizure and arrest of people; the blocking of bank accounts; and the attachment over assets) have been suspended.