Public Interest and Insolvency in the UAE

The United Arab Emirates has established a sophisticated legal framework for financial restructuring and bankruptcy, most recently embodied in Federal Decree Law No. 51 of 2023 (the Insolvency Law). The Insolvency Law is not only a technical instrument addressing debtor and creditor interests but also a legislative tool designed to protect the broader public interest and uphold public order. The concept of public order is deeply embedded in UAE law, including its Constitution and judicial practice, and plays a decisive role in shaping the application and interpretation of bankruptcy proceedings.

Public order in the UAE legal system

Public order in the UAE is a foundational legal principle, referenced explicitly in the Constitution and often invoked by the courts. Article 44 of the UAE Constitution states that "respect of the Constitution, the laws and the orders issued by the public authorities in execution thereof, compliance with the public order, and respect of public moral are duties binding to all the people living in the UAE."

Public order is understood as encompassing the ultimate interests of society and the ethical, economic, and political foundations of the state.

The UAE's bankruptcy law is expressly recognised as a matter of public order. The Abu Dhabi Court of Cassation has affirmed that the rules and procedures governing bankruptcy are not merely contractual or private in nature but are mandatory provisions that serve the collective interests of society. In a landmark 2024 decision, the court annulled an arbitral award that conflicted with bankruptcy proceedings, ruling that the exclusive jurisdiction of bankruptcy courts and the mandatory nature of bankruptcy procedures are integral to public order. The court stated that public order is "one of the essential safeguards the respect of which is a priority in all acts and judgments, for it is relating to the ultimate interest of the society and to the social or political or economic or ethical basis on which the State is founded". 

Balancing private and public interests

The Insolvency Law articulates clear objectives that go beyond the interests of debtors and creditors in assisting debtors in settling debts and preserving the rights of creditors. The law aims to maintain the vitality of the national economy and protect jobs and maintain business continuity.

These objectives reflect a legislative intent to balance private interests with the protection of the credit system and the broader public interest. The law empowers courts to exercise discretion when assessing public order, such as by authorising selective payments to critical suppliers or employees when necessary to prevent greater social costs.

In practice, the concept of public interest operates as a governing standard throughout bankruptcy proceedings. Courts, trustees, and creditors are required to consider the broader economic and social impact of their decisions at every stage, including at the following stages:

1. Commencement of proceedings: Courts assess whether starting bankruptcy proceedings will stabilise wages, supply chains, and affect a group of creditors.
2. Reorganisation vs. liquidation: The law mandates a careful assessment of job preservation and the social consequences of liquidation.
3. Assessment of critical suppliers and wages: Exceptions to the pari passu principle (equal treatment of creditors) are permitted when justified by public interest.
4. Approval of plans: Reorganisation plans must demonstrate feasibility, fairness, and visible public benefits, such as job preservation and market stability. 

The UAE judiciary has consistently enforced the public order nature of bankruptcy law. For example, the Abu Dhabi Court of Cassation annulled an arbitral award that conflicted with bankruptcy proceedings, emphasising that bankruptcy court jurisdiction is exclusive and mandatory, and that arbitration agreements are inoperative in bankruptcy cases.

Conclusion

Bankruptcy law in the UAE is not merely a set of private rules that governs the interests of debtors and creditors but a public order regime designed to protect economic stability, market confidence, and the interests of society as a whole. Courts, trustees, and creditors are all bound to act in accordance with public order, ensuring that bankruptcy proceedings serve not only the parties involved but also the broader public good.