New UAE Pledge Law Takes Effect

    March 2017
    On 15 March 2017 a significant new law, Law No 20 of 2016 Regarding the Pledge of Movables as Security for a Debt (“Pledge Law”), came into force in the United Arab Emirates (UAE). The new law is poised to substantially alter and create certainty in commercial lending practices in the UAE. It provides protections against the multiple pledges of assets to different lenders by borrowers, and is designed to encourage the adoption of more prudent lending practices by lenders in a market long dominated by “name” and family-based lending in place of contemporary best practice risk analysis.

    The advent of the Pledge Law is part of a recent flood of commercial legislation in the UAE which has included the introduction of a new national Commercial Companies Law and Bankruptcy Law. Unlike those laws, however, which had been anticipated for the better part of a decade, the Pledge Law was introduced with little notice or fanfare. Given the scope and potential effect of the law, its sudden and unheralded arrival was something of a surprise to practitioners and the financial community alike.