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June 16, 2015
What law governs
The main source of law in the UAE is Sharia in which all laws are formulated and based on. It is considered a public order. The governing law for succession in the country is UAE Federal Law No. 5 of 1985 or the Civil Transactions Code which states in Article 17 (1) that "Inheritance shall be governed by the law of the deceased at the time of his death" and Article 17(5) which states that "The law of the United Arab Emirates shall apply to wills made by aliens disposing of their real property located in the state".
It appears that Article 17(1) gives the general rule that the law of the deceased shall apply upon his death on inheritance while Article 17(5) is the express exclusion that the law of the UAE shall apply with regard to the deceased real property located in the country. However, it will also be noted that Art. 2 of the same Code provided that "The rules and principles of Islamic jurisprudence shall be relied upon in the understanding, construction and interpretation of these provisions".
Interpretation of the UAE inheritance rules is further complicated by UAE Federal Law No. 28 of 2005 or the "Personal Status Law" which provides in Art. 1(2) that "The provisions of this Law shall apply on citizens of the United Arab Emirates State unless non - Muslims among them have special provisions applicable to their community or confession. They shall equally apply to non citizens unless one of them asks for the application of his law". The intent of this provision is to give the foreigner a choice to apply his home country law and avoid the application of Shariah in the disposition of his assets.
The court then has two options in applying these rules:
Even though the Personal Status law of the UAE provides that foreigners may request the court for the application of their home country law, this law did not expressly amend the Civil Code of the country. This gave rise to the uncertainty of whether or not a non-Muslim and non-UAE national inheritance and wills will be subjected to Sharia law and not according to their own intentions as per their home country law.
The procedure, cost and uncertainty in the outcome of the decision is what makes the expatriates/foreigners hesitant to invest in real property in the UAE.
How to address uncertainty and encourage investment
As a response to the growing number of expatriates in the country and the growing need to address the issue of uncertainty in succession and inheritance matters, the DIFC has come up with a proposal for the creation of registry of wills that will apply to assets located in Dubai. The draft of rules governing this is now published in the DIFC website. The proposed application of the new system is limited only to properties located in Dubai and available only to non-Muslims.
The DIFC rules pertaining to the registry of wills puts certainty in the emirate and will encourage more investment particularly in the real estate sector. As with other matters pertaining to wills, jurisdiction can be used as a ground to challenge a will. Hence, DIFC and Dubai courts are working together to address issues of jurisdiction and other matters to avoid conflict and to maintain synergy.
Foreign Judgment of a Will
A foreign will that has been approved by a foreign judgment is easier to be enforced here rather than having the will brought to the UAE courts for the first time because of the risk that Sharia law will be applied in the judgment.
No Doctrine of Survivorship
There's no doctrine of survivorship in this jurisdiction. Freezing of assets including joint accounts in banks happen in the UAE. It does not happen automatically though, but if notice is given, freezing of assets can then happen.
It is the obligation of the co-joint account holder to notify the bank about the death of the other.
Life Insurance Policies
It is important to know which jurisdiction covers them - the country where it was taken from has jurisdiction over it.
Insurance policies taken by the employer in favor of its employees is not part of the estate of the deceased. But if employee will agree that Sharia law will apply to it, then it can be taken as part of the estate and court could keep it with the whole inheritance.
If insurance policy defined the beneficiary's name, then beneficiary will be the receiver of the insurance value as beneficiary according to the civil law regardless of principles of Sharia law.