Cross-Border Insolvency in Dubai: Guide by Al Saadi Advocates to Secure Millions in Gratuity Claims

The Crisis: When Foreign Financial Distress Hits UAE Employees

A significant number of recent layoffs in the UAE private sector have exposed a critical legal flashpoint: the intersection of local employment rights and international insolvency law. Hundreds of affected employees are facing uncertainty regarding their End-of-Service Benefits (EOSB) because their employer’s foreign-based parent company has entered court-supervised administration abroad.

The legal reality is assertive: Your rights are legally secured under UAE law, but immediate, aggressive legal action is mandatory to secure the funds locally. The threat is not the law, but the rapid dissipation of assets by foreign administrators.

Al Saadi Advocates on Cross-Border Insolvency and Asset Protection in Dubai

The Core Principle: UAE Law Governs All Local Claims

Do not be misled by the foreign administration process. Your entitlements are absolute and governed by UAE Federal Law.

  • Gratuity is a Legal Right: Any foreign employee who has completed one year or more of continuous service is entitled to full EOSB upon termination. This right is not forfeited due to the employer’s financial distress.
  • The 14-Day Payment Mandate: Employers are legally required to pay all final settlements (EOSB, notice pay, accrued leave) within 14 days of the termination date. Failure to meet this timeline is a direct breach of law.

Reference: These employment rights are established in Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relationship (UAE Labor Law).

Access the full Decree-Law via MoHRE

The Cross-Border Insolvency Threat and Asset Protection

The complexity arises because the UAE does not automatically recognize or enforce foreign administration or bankruptcy orders (outside of specific Free Zones like the DIFC and ADGM).

  • Jurisdictional Conflict: The foreign administrator is legally required to maximize recovery for the foreign entity’s creditors. This often conflicts directly with the interests of UAE employees seeking local payment.
  • The Risk of Dissipation (The Key Danger): The immediate danger is the dissipation of assets. If the local management, under instruction, transfers bank funds or sells movable assets out of the UAE, circumventing a future UAE Labour Court judgment.

Legal Basis for Non-Recognition: The enforcement of a foreign insolvency order (which is treated as a foreign judgment) on the UAE mainland is governed by the conditions set out in the UAE Civil Procedure Law. Since the UAE has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, foreign insolvency proceedings must be ratified by the local onshore courts, a process that is not automatic.

Reference: The process and conditions for enforcing foreign judgments are governed by Federal Decree-Law No. 42 of 2022 on the Promulgation of the Civil Procedure Law.

Access the full Civil Procedure Law (Refer to Chapter IV, Articles 222-225)

 

Mandatory Steps: What Affected Employees Must Do

Given the cross-border risk, swift and legally precise action is mandatory to secure your earned funds.

  1. Secure and Inventory Documentation

Immediately gather and securely store all key employment documents, including: Original Employment Contract, Salary Slips (especially the last three months), Termination Notice/Letter, and any correspondence regarding unpaid dues.

  1. File a Formal Complaint with MoHRE

This is the mandatory first step. Employees, even as a collective, must register their Labour dispute with the Ministry of Human Resources and Emiratisation (MoHRE). Do not rely on promises; initiate the formal legal process. Contact MoHRE for Labour Claims and Advisory Center

  1. Seek Specialized Legal Representation Immediately

Do not wait for the 14-day payment deadline to pass. Engage specialized litigation counsel before the assets are dissipated. A firm experienced in cross-border disputes is essential to ensure your claims are correctly ranked and pursued aggressively.

  1. Support the Application for an Asset Freeze

Your legal counsel’s primary goal will be obtaining a Precautionary Attachment Order from the UAE Courts. Cooperate fully and immediately with your attorney to provide the necessary evidence to support the application to legally freeze the local bank accounts and critical assets of the UAE entity.

The Urgent Legal Strategy: Priority and Precautionary Attachment

Employee Claims as Preferred Debts

Under Federal Decree-Law No. 51 of 2023 on Financial Reorganization and Bankruptcy, employee claims (including up to three months of wages and full EOSB) are classified as Preferred Debts. This high-ranking priority ensures they must be settled before most general unsecured creditors.

Access the full Bankruptcy Law (2023)

The Critical Step: Precautionary Attachment Order

This powerful legal tool legally freezes the local bank accounts and critical assets of the UAE company. This action is paramount: it prevents asset dissipation and creates a secured pool of funds from which the employees’ collective claim will be paid once the Labor Court issues its final judgment.

Al Saadi Advocates: Your Defence Against Cross-Border Insolvency in Dubai

Do not allow the complexity of foreign administration to cost you years of earned benefits. The foreign company’s debt is not your problem, but securing your payment is now a legal race against time. The only way to guarantee payment is to secure local assets now.

URGENT LEGAL INTERVENTION IS MANDATORY.

Call Al Saadi Advocates today for a confidential consultation. We specialize in rapidly securing employee claims through Precautionary Attachment Orders against assets threatened by cross-border insolvency and foreign administration.

 

This blog post is published by Al Saadi Advocates for informational purposes only and is intended to provide general guidance and awareness. This content does not constitute, and is not a substitute for, formal legal advice from a qualified lawyer licensed to practice in the United Arab Emirates.