The United Arab Emirates’ cabinet adopted a final version of the federal bankruptcy law, as the oil-rich nation tries to attract investors put off by current rules that criminalize an inability to repay debt.
The law “aims to enhance foreign investment and ease the work of commercial companies,” Sheikh Mohammed bin Rashid Al Maktoum, the U.A.E.’s prime minister and Dubai’s ruler, said on Twitter on Sunday. The post included no details of the new law.
The absence of a bankruptcy law was widely blamed for the thousands of Dubai residents who fled the city after losing their jobs in the 2008 financial crisis. Faced with the possibility of jail time, many said they had no choice but to leave their cars and belongings after the economic slowdown left them unable to repay debts. Post-dated checks are the most common way to pay residential rent in the U.A.E., and the method is used to secure most debts.
The law is expected to be modeled on Chapter 11 proceedings in the U.S., The National newspaper reported last September, citing the Abu Dhabi Council for Economic Development. The U.S. system allows companies to renegotiate the terms of their debts with creditors.