An Insurer’s Guide to the Key Changes in the UAE’s New Maritime Law - UAE Federal Decree No. (43) of 2023

The United Arab Emirates' (the "UAE") unique global location makes it an important place for international maritime trade. To encourage trade and smooth operations of vessels calling at UAE ports, the country acknowledges the importance of developing its legal framework to bring it in line with the common international practices we see across the industry. The UAE has now repealed and replaced the previous maritime law, Federal Law No. 26 of 1981 Concerning Commercial Maritime Law (the “Old Law”), with UAE Federal Maritime Law No. 43 of 2023 (the “New Law”).

This article will explore how the changes will align the UAE with other international shipping jurisdictions. Some of the key changes include the acceptance of P&I Club security to lift arrests of vessels, amended and shorter time bars in collision and towage claims, the ability to apply limitation and the establishment of limitation funds by the courts. There are also some procedural changes in litigation and the registration of vessels. The Club deals with the UAE region frequently and recognises the importance of highlighting the new changes to Members and the parties we deal with.

Who does the New Maritime Law apply to?

The decree will apply to all marine structures, ships and maritime means engaging in marine transportation and navigation activities.  This includes ships, floating structures, and offshore platforms. 

Ownership and vessel registration of vessels in the UAE

Under the New Law there will be a wider scope for qualifying to register a ship in the ship registry by the ministry, however stricter restrictions on a ship’s age will apply. Also, there will be an introduction to a new record called “under building ship registry” which places an obligation on a shipbuilding contractor to enter the shipbuilding contract into the registry as opposed to a buyer. This indicates that there will need to be more cooperation expected from shipbuilding contractors with owners. 

The wider inclusion of criteria to register a ship under the UAE flag may indicate the future opportunities for companies to establish an office in the UAE or encourage the merging or joint venture of companies. It will be interesting to see whether more headquarters will soon be based in the UAE.

	Old Law	New Law
Article	14, 18,24	13, 9
Who can own a UAE registered vessel	Individuals who are UAE nationals. Companies where all or a majority of its shareholders and directors hold UAE nationality depending on the company type, article (art) 14.	Majority of shares to be owned by a UAE national. GCC national. Or a business centre or office for management of the ship which is based in UAE. This allows foreign individual or entities to own a vessel registered under the UAE flag, provided they have a domicile, business office or ship management office in the UAE, art 13.
Age restriction to register a vessel	Only on oil and gas tankers to be registered that are not more than 10 years except with the approval of the council. No restrictions on other types of vessels.	Within 20 years after the date of completion of building. Passenger ships to be registered that are not more than 10 years.
Who need to register new build ships?	“Applicant” which usually is the buyer.	Ship building contractor.

 

Vessel arrest and acceptance of LoU

The New Law places the UAE on an international standard with its new legal framework with respect to the procedure to arrest and lift arrests. To arrest a vessel in UAE is now more of a straightforward approach by having to show the right of arrest within the defined list. The New Law has expanded the list of specific debts that now qualify as a 'maritime debt', for example, port fees, channels, docks, harbour, and any dispute arising from a contract of sale of the vessel. Additionally, another change that has been introduced by the New Law is that the party seeking an arrest must now provide countersecurity at the time of obtaining the arrest.

Furthermore, one of the key changes is the acceptance of clubs’ Letter of Undertakings (LoU), subject to acceptance by the competent court, as security to lift an arrest. This change will be a more efficient way to ensure the smooth operations of the vessel and to align with international standard. In addition, this allows for a unified approach to be applied across all UAE ports. The provisions for the acceptance of the letters of guarantee is yet to be specified in the Executive Regulations but this is expected in due course.

The procedural time frame for arranging a court hearing has also been amended to allow for a shorter period regarding the court formalities. For example, under the Old Law a hearing was to be fixed within 30 days, whereas under the New Law a hearing is to be fixed within 15 days.

	Old Law	New Law
Articles related to maritime debt and to the arrest	115-122	53-60
Articles related to priority rights	84 and 105	29 and 44
Right of Arrest	Need to establish that your debt is classified as a maritime debt as per article 115. If the arresting party established that its debt is classified as a maritime debt under article 115, the arresting party could arrest the subject vessel, or any other vessel (sister ship) owned by the owner at the time the debt arose.	Provides a defined list from (a)-(v) describing them as maritime debts. If it’s one of those rights, the arresting party can arrest the subject ship, or any other ship (sister ship) owned by the debtor provided the ship is owned by the same owners at the time of filing the arrest.
Financial Security	Most of the UAE courts were not requesting countersecurity at the time of filing the arrest except Fujairah and Khorfakkan. The amount of the countersecurity was at the discretion of the urgent matters judge based on the claim amount.  Also, some courts were usually asking the arresting party to deposit an undertaking to pay the expenses of the crew members and their repatriation costs in case of abandonment.	The arresting party must provide financial security acceptable by the UAE courts to proceed with the arrest application. The security needs to fulfil the mandatory needs for the security and safety of the ship and its crew during the period of the arrest.
Lifting arrest	If a guarantee or other sufficient security to satisfy the debt was provided.	If security is provided by a non-arresting party in the form of letter of guarantee issued by a P&I club or by a financial institution that is approved by the competent court.
Procedural time frame	To file the substantive claim within 8 days. Hearing to be fixed no later than 30 days from date of the notice of the arrest.  Order may be appealed within 15 days from the date of the judgment.	To file the substantive claim within 5 days. Hearing to be fixed no later than 15 days.  Order may be appealed within 15 days from date of the judgment. COA shall issue its judgment within one week and without referring the case to the case management office.

Limitation of liability

The UAE legal framework has made some developments to its limitation of liability regime over the past few years. In 1997 they implemented the LLMC 1976. In 2021, the 1996 Protocol came into force placing higher limits of liability on owners. Yet, the Maritime Code remained in force and contained general limits that didn’t mirror the limits under the LLMC 1976 and the 1996 Protocol. For example, under article 141 of the Old Law, the limits were referred to in Dirhams, as opposed to SDR figures. Pursuant to article 83 of the New Law, we can now see reference to SDR figures, which brings the law in line with the LLMC.

Another change to limitation is the ability for owners to establish a limitation fund in the UAE. Previously, the UAE courts didn’t have the regulations to allow the establishment of a fund, but owners could still limit their liability. The new procedures to establish a fund provides more protection to owners seeking to limit their liability and also brings it into line with the practice in many other jurisdictions. The law doesn’t specify that club LoUs will be accepted to establish a fund specifically. However, as there is an express acceptance of club LoUs to release vessels from arrest, it is likely that the courts may accept a club LoU when establishing a fund. This may be covered in the Executive Regulations.

 

	Old Law	New Law
Article	141	83
Limits	250 dirhams for each ton if material damages results. 500 dirhams for each ton if bodily injury results. 750 if material and bodily injury results, art 141(1).	Similar tonnage and SDR figures to the 1996 Protocol. For material damages: 1m SDR < 2,000. 400 SDR for each additional ton if the ship tonnage ranges from 2,0001 – 30,0000. 300 SDR for each additional ton if ship tonnage ranges from 30,001- 70,000. 200 SDR for each additional ton if ship tonnage > 70,000.
Fund	No rules/regulations to establish a fund.	UAE courts can establish funds.
Procedural	N/A same as above.	To be established immediately upon request, in accordance with provisions specified by the Executive Regulations.

 

Carrier responsibility for loss of or damage to cargo

In most common shipping jurisdictions, the rules that apply to the carriage of goods by sea are governed by the Hague/Hague Visby Rules (“HVR”). The HVR place mandatory rights and obligations between the concerned parties. The HVR are usually implemented in local law through domestic legislation. For example, the Hague Visby Rules are brought into English Law by the Carriage of Goods by Sea Act 1971.

The UAE has not ratified the HVR, yet under the Old Law it reflected similar concepts to the HVR. Even with the introduction of the New Law, this position remains the same. The UAE is still not a signatory to the HVR. However, the difference now is that there are some changes to the domestic legislation that bring it even more into line with the HVR. Specifically, in relation to the SDR figure calculations.

For example, you may note below that under the Old Law the limit was 10,000 Dirhams per package (about US$ 2,723 per package). Under the New Law the limit is 835 SDR per package (about USS 1,110). Whereas under the HVR the limit is 666.67 SDR per package (about USS 880.1). The limitation figure per package under the New Law has come down significantly from the Old Law and is now much closer to the HVR limits.

	Old Law	New Law	HVR
Article	256-287	156-187	Article 1- 18
Period of liability	“during the period from the time he takes delivery of the goods at the port of loading to the time he delivers the same to the person having the right to them at the port of discharge”, article 275.	“between his receipt of the goods and their delivery to the person entitled to receive them”, art 175 (1).	“before and at the beginning of the voyage”, art III (1) .
Exceptions to liability	Listed in article 275(a)-(s).	If the carrier, its subordinates, and its agent have taken all reasonable measures to prevent the damage or that it is impossible for the carrier to take such measures, art 175 (1). Fire occurred to the cargo and such fire was not a result from the fault of the carrier or one of its subordinates or agents, art 175 (2).	There are seventeen listed exceptions, art IV(2).
Limitation of liability	Not exceeding 10,000 Dirhams for each package or unit or AED 30 per kilogram of the gross weight of the goods, whichever is the higher limit, art 276(1).	835 SDRs for each package or unit or 2.5 SDRs for each kilogram of the gross weight of the goods, whichever is the higher limit, art 177.	666.67 SDR per package or unit or 2 SDR per kilo of the gross weight of the goods, whichever is higher, art IV 5(a).
Time bar	One year from the date of delivery of goods or from date which the goods should have been delivered, art 287(a)	One year from the delivery of the goods or date they should have been delivered, art 187(1).	One year of their delivery, or the date when they should have been delivered, art III (6)

 

Time bars

Time bars are a very important concept in terms of the potential defences to a claim. One of the things to be checked when notified of a claim is whether the claim is time barred, to allow the shipowner to be released from liability and reject a claim. In general, the UAE courts do uphold time bar arguments, but there may be uncertainty to how they may be applied in practice. In the absence of admission of liability or interruption due to lawful excuse, the position under the Old Law was that towage and collision claims are time barred two years after the date of the incident. Whereas the New Law places shorter time periods; collision and towage claims will now be time barred after only one year. Additionally, it is also worth noting that the New Law has reduced the time limit for filing a marine insurance claim to one year instead of the previous two-years under the Old Law.

However, it is critical to know that the New Law doesn’t prevail over international agreements, conventions and protocols approved by the UAE (article 2). For example, the UAE is not a party to the Convention for the Unification of Certain Rules of Law with respect to Collisions between Vessels 1910 (the “1910 Convention”), but it has ratified the Convention on the International Regulations for Preventing Collisions at Sea 1972, as amended (“COLREGs”). Thus, the COLREGs forms part of the UAE law when a collision occurs, but the Collision Convention does not. Given that the UAE is not a party to the 1910 Convention, therefore the one year under the New Law will apply for now.

It is unusual to see jurisdictions that have a shorter time period for time limits on collision claims than two years. Even nearby jurisdictions like Saudi Arabia and Oman have a two-year time period. In general, it takes time to repair a vessel and present the full claim so one year may be considered insufficient by many claimants. Therefore, in the future, it is highly likely that we will see more time extension requests to allow the parties to protect the time bar in the UAE.

	Old Law	New Law
Collision time bar	Two years from the date of the incident, art 326(1).	One year from the date of the incident, art 241(1).
Towage time bar	Two years from the date of termination of the operation, art 317.	One year from date of termination of the operation, art 109.

 

Crew Contracts

The Club reviews crew contracts regularly for its Members and under the Old Law there was no minimum age requirement, whereas now it’s not permissible to employ anyone under the age of sixteen. This is the same age requirement under the Maritime Labour Convention 2006 ("MLC"). Although the UAE has not ratified the MLC, the transport ministry has previously said it would comply with the spirit of the MLC.

Conclusion

In a nutshell, the New Law will provide the UAE with a series of welcome developments to modernise its maritime framework. In particular, it is good to finally receive official guidance on the recognition of Club security and to see the ability for owners to protect their limitation rights by being able to now establish a limitation fund in the UAE courts.

In addition, the wider approach of vessel registration in the UAE and more specific rules for vessel types is likely to be seen as a positive development. There are some measures which don’t mirror the international conventions regimes as closely as many would like them to, and in respect of subjects like limitation for cargo claims, we imagine there maybe appeals for more changes in the future.

Sara Assi – Claims Executive, Offshore Syndicate

The Club would like to thank Mahmoud El Sayed and Khurram Ali of Stephenson Harwood Middle East LLP for their assistance with this article.