INHERITANCE ISSUES – THE WAY FORWARD

I. Conflict of Private International Law with practice and procedure in UAE – Domicile explored What law would apply to the distribution of assets in the UAE upon the death of an Expatriate? Domicile is commonly defined as “Place of a person’s true, fixed and permanent home and principal establishment and to which he has the intention of returning whenever he is absent from that place.” Domicile of origin Every person receives at birth a domicile of origin – normally that of his father. Domicile of choice Every independent person can acquire a domicile of choice by the creation of residence and intention of permanent or indefinite residence, but not otherwise. Civil Law v. Common Law Civil Law derives its origins from Roman Laws and later on the various laws became codified. One code of importance would be the Napoleonic Code which is the basis upon which the Egyptian Civil Code of 1949 was born and thereafter adopted in many countries in the Arab world, UAE being one of them. The main difference is that under common law, there is the doctrine of stare decisis where judgments are considered binding upon the lower courts. Whereas in civil code countries, legislation is considered as a primary source of law. Judgments are not considered binding but persuasive. It is therefore difficult for lawyers to guarantee for certain outcome of Judgments. INHERITANCE ISSUES – THE WAY FORWARD

II. UAE laws summarised a.UAE Personal Status Law The Personal Status Law is silent as to the inheritance rights of foreigners in possession of UAE realty. b.UAE Civil Transactions Code While Article 17 (1) states : “Inheritance shall be governed by the law of the deceased at the time of his death.”, however, Article 17 (5) states : “The law of the United Arab Emirates shall apply to wills made by aliens disposing of their real property located in the State.” Furthermore the Sharia Court of First Instance applies Article 2 of the UAE Civil Transactions Code, which states : “The rules and principles of Islamic jurisprudence (fiqh) shall be relied upon in the understanding, construction and interpretation of these provisions.” Due to the conflict between Articles 17(1), 17(5), and 2, different interpretations of the laws of the UAE have arisen. III. Dilemma faced by Expatriates a.What type of Will shall I draft and does it need to be notarised and legalised? The Personal Status Law does not contemplate that a will with foreign Law or provisions contrary to Sharia could be issued. Reference is made to Article 1 (2) and Article 424. INHERITANCE ISSUES – THE WAY FORWARD

Therefore there is no such thing as a UAE Will. A will should be drafted by experts from the countries of domicile of the Expatriate (or nationality subject to review of the EU Brussels legislation, if applicable), having regard to the gifting problems, tax and other issues. With increasing complexity as to what is the residency and domicile of a client, practitioners must ensure they understand the international aspects of drafting wills or they could face costly disputes. Every Expatriate should be asked the following questions : I. What is their domicile or should they specify their nationality (in view of EU provisions)? II. Do they already have a will? III. Do they have assets in the UAE and do they intend to keep these assets here? Therefore so long as there is no UAE legislation clarifying the provision of a Will for non-Muslim Expatriates, therefore there is no such thing as a UAE Will. For Civil Code countries, the drafting and enforcement of a Will does not arise through customs. b. Notary’s rules – is this binding? Does this mean my Will, if notarised, would be enforced? Please note the fees involved and see Paragraph 12 of the attached scanned leaflet from the Dubai Notary.

INHERITANCE ISSUES – THE WAY FORWARD c. Does Sharia Law therefore apply to Expatriates? Recent Dubai Court Cases explored. I. Presently the majority of the judges apply Sharia Law and ignore any Foreign Wills; II. Even if you manage to obtain the ears of a sympathetic judge, it would take over 12 months and could cost more than Dhs 50,000 (Advocate fees, notarisation and legalisaiton of the Foreign documents, translation costs and foreign lawyers’ fees). What actually happens when a foreigner passes away and has assets in the UAE. What is the procedure in the Sharia Court? What entities require the Court Orders before they distribute the assets? Procedure summarised. In February 2011, we managed to obtain an Inheritance Succession Certificate in the Dubai Courts within 3 hours of presenting the requisite documents.

INHERITANCE ISSUES – THE WAY FORWARD IV.Conclusion a.Recommendations to the Expatriates I. Bank Accounts – please have individual bank accounts with the other spouse as a signatory; II. Offshore companies – could be used for : (a) opening onshore bank accounts (b) taking up shares in entities such as LLCs or Free Zone entities (c) taking up shares in JAFZ Offshore Companies if Dubai properties are involved or even taking over properties in other Emirates such as Abu Dhabi / Ras Al Khaimah. III. Submit to Sharia Law – the whole process for obtaining the Inheritance Succession Certificate and Distribution Order in the Courts is short. There is no need to wait for any Grants of Probate or Foreign Court Orders to go to Sharia Court and submit to Sharia Law for the distribution of your estate. IV. We also recommend that powers of attorney are issued by the Sharia Qu’rannic Heirs in favour of the Intended Beneficiaries in order that the Intended Beneficiaries would take over the assets in the UAE without having to go through the Proofing of the Foreign Grant or Court Order. These powers of attorney duly notarised and legalised (if made abroad), would be respected and upheld in the Sharia Court. [Please take further advice from tax consultants in particular when you are a US or EU Citizen or have assets in the US or EU.]

b.Recommendations to the Legislature i. Clarify the legislation and ensure that the Courts uphold foreign wills for assets. ii. Simply the procedure for enforcement of the foreign wills. iii. Request the Government Departments to uphold Foreign Probate/ Court Orders duly notarised legalised and translated. Thank you, Cynthia Trench Trench & Associates © INHERITANCE ISSUES – THE WAY FORWARD