UAE Anti-Commercial Fraud Law passes through the Federal National Council
By Rob Deans and Harriet Balloch, Clyde & Co
The draft Anti-Commercial Fraud Law was first introduced in early 2013 and the draft law has now passed through the Federal National Council (FNC), an elected form of parliamentary advisory body, is a key stage in the legislative process and it brings the draft law one step closer to being enacted. The following is a guide to the positive new measure of the draft law, as well as causes for concern.
Positive news for brand owners
There is currently limited information on how much the draft Anti-Commercial Fraud Law has been amended during its passage through the FNC. However, it appears that the draft law is likely to include the following positive provisions for brand owners:
- The establishment of a single body with the role of combating trade in counterfeit goods across the UAE. Under the current regime, brand owners must deal with counterfeit goods authorities in each of the country’s seven emirates. This requires brand owners to deal with multiple authorities in cases where infringing goods are being sold in more than one emirate. A structure that enables brand owners to deal with a single cross-emirate enforcement body is likely to be more efficient and effective than the current one.
- Increased penalties for dealing in counterfeit goods. The draft Anti-Commercial Fraud Law includes a significant increase in the penalties, which may be imposed on those dealing in counterfeit goods. In certain limited cases, such as dealing in pharmaceutical and food products, a fine of up to AED1 million (approximately $270,000) may be imposed together with a two-year prison sentence.
- The cost of the destruction of counterfeit goods being paid by the importer of counterfeit goods. This is positive news for brand owners, in cases where the importer can be identified.
- An obligation on infringers to disclose to the authorities all information and documents relating to their dealings in counterfeit goods. The inclusion of this obligation in the draft law may encourage the authorities to not only seize stocks of counterfeit goods, but also to obtain copies of information on the source of the goods and the scale of the infringing activity.
- A prohibition on the possession of counterfeit goods. This provision should be a useful tool where counterfeit goods are held by traders with no clear evidence of an intention to sell. However, it remains to be seen whether this provision would also be used to seize counterfeit goods held by private individuals. It is, however, confirmed that the draft law applies to infringers operating within the UAE’s free zones.
Areas of concern
There are also areas of concern for brand owners arising from an early draft of the Anti-Commercial Fraud Law, which may not have been addressed by the FNC, such as:
- Legitimising the practise of re-exporting counterfeit goods, rather than seizing and destroying them. The biggest concern for brand owners is a provision that empowers the authorities to require importers to return counterfeit goods to their country of origin. This provision appears to have been untouched and it remains a major concern for brand owners, in that counterfeit goods may be re-exported from the UAE and then find their way back onto the market in the Emirates or elsewhere. It can also be interpreted by the UAE Courts as a general right to allow counterfeit goods to be re-exported, which would appear to conflict with the UAE’s obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights, which restricts the re-exportation of counterfeit goods in an unaltered state, other than in exceptional circumstances.
- The extent to which the draft Anti-Commercial Fraud Law covers lookalike goods, in addition to those bearing a trademark, which is identical to a registered mark. An early draft of the law restricted many of its key provisions to the unauthorised use of identical trademarks, but not goods bearing confusingly similar marks and other forms of lookalikes. It is unclear at this stage the extent to which the draft law may have been amended to extend its scope to lookalikes.
- Low penalties for dealing in counterfeit goods. Although in some limited cases a penalty of a $270,000 fine plus two years imprisonment may be imposed in many cases involving counterfeit goods, the maximum punishment appears to be limited to a maximum of a tenth of this amount $27,000 plus one year imprisonment, regardless of the quantities of counterfeit goods involved. This was the position in an early draft of the Anti-Commercial Fraud Law and it is unclear whether this provision has been amended to allow for penalties with a higher deterrent value.
- Allowing seized counterfeit goods to be released unless a court order has been issued within 30 days confirming the seizure. This provision could require brand owners to make expensive applications to Court, which previously would have been handled quickly and efficiently through an administrative action. The extent to which this provision may have been amended during the draft law’s passage through the FNC is currently unclear.
Finalisation and enactment of the draft law
In order to be enacted, the draft law has to be signed into law by His Highness Sheikh Khalifa bin Zayed Al Nahyan, President of the UAE, and published in the UAE Official Gazette. Before this, the draft law should pass back to the ministerial level where further amendments may be introduced.
Accordingly, although current reports indicate that the draft law will come into force within the next six months, it is possible that this process may be delayed, particularly if further changes are made. This has been the case with other UAE laws, such as the draft Companies Law, which passed through the FNC in May 2013, which has not yet been enacted.