Decretal Federal Law No (10) of 2018, Regarding Netting (finance and banking law)

Article (1) 
Definitions  
In the implementation of provisions of this decretal law, and unless the context otherwise 
requires, the following words and expressions shall have the meanings cited against each:  
State:  : The United Arab Emirates . 
The Ministry  : The Ministry of Finance . 
The Minister  :  The Minister of Finance . 
The 
Committee  : Committee for Designation of Qualified Financial Contracts . 
The 
Regulatory 
Authorities in 
the State  :  The Central Bank of the United Arab Emirates, the Securities & 
Commodities Authority, and the Insurance Authority .  
 
Financial Free 
Zones  : Financial free zones established in accordance with provisions of Federal 
Law No (8) of 2004  referred to . 
Qualified 
Fina ncial 
Contracts  : Financial contracts established under an agreement, contract or any 
transaction, including any terms and conditions attached thereto . 
Cash  : Money credited to an account in any currency, or any other monetary 
claim for repayment of money, including money market deposits . 
Multi -Branch 
Netting 
Agreement  : A Netting Agreement between two parties under which any of the parties 
enters into a Qualified Financial Contract through its Home Office in 
addition to one or more of its branches or agencies located in countries 
other than its Home Country .  
Person  : A natural person or a judicial person . Decretal Federal Law No (10) of 2018, Regarding Netting  3 
 Insolvency 
and 
Bankruptcy 
Procedures  : Any procedure under the provisions of laws relating to bankruptcy, 
insolvency, liquidation including any  compulsory winding up procedure, 
reorganisation, composition with creditors, receivership, conservatorship or 
any other similar procedures in force in the State . 
Insolvent  : The Person in respect to whom Insolvency and Bankruptcy Procedures 
have been initiated under laws in force in the State . 
Liquidator  : The Person who is in charge of liquidation or receivership procedures, or 
nominated to carry out such procedures; or the trustee, conservator, 
supervisor for such procedures or other Person or entit y, which administers 
the affairs of an Insolvent during Insolvency and Bankruptcy Proceedings 
under the laws in force in the State . 
Collateral  : All that is provided to secure or enhance a right or obligation arising out of 
a Netting Agreement or a contract of Qualified Financial Contracts, and 
including any of the following:  
1. Cash in any currency;  
2. Securities, and any rights or claims related thereto;  
3. Guarantees, letters of credit and obligations to reimburse; and  
4. Any asset commonly used as collateral in the State . 
Collateral 
Arrangement   : Any margin, variation margin, collateral or security procedures or other 
credit enhancement tools related to, or forming part of a Netting 
Agreement or one or more Qualified Financial Contracts entered into 
thereunder, or to which a Netting Agreement applies, including:  
1. A pledge, mortgage, charge or any other form of security interest in 
Collateral, wh ether possessory or non -possessory;  
2. A title transfer Collateral Arrangement; and  
3. Any guarantee, letter of credit or reimbursement obligation by or to 
another party to a Qualified Financial Contract, in relation to those 
contracts.  
Title Transfer 
Collateral : A margin, Collateral or security procedures related to a Netting Agreement 
based on the transfer of title to Collateral, whether by outright transfer or Decretal Federal Law No (10) of 2018, Regarding Netting  4 
 Arrangement  by way of security, including a sale and repurchase agreement, securities 
lending agreement, securities buy/sell -back agreement or a pledge or 
mortgage in accordance with special terms and conditions . 
Home 
Country  : The jurisdiction where any of the parties to a Netting Agreement is 
incorporated, regulated or duly re gistered.  
Home Office  : The office at the Home Country of any party to a Netting Agreement . 
Foreign Party  : A party whose Home Country is outside the State or within the Financial 
Free Zones .

Article (2)  
Scope of Application of the Law  
1. The provisions of this decretal law shall apply to all Qualified Financial Contracts, Netting 
Agreements specified under this decretal law or Collateral Arrangement, which are entered 
into by any Person in the State.  
2. This decretal law does not apply to the Financial Free Zones and financial institutions licensed thereby to the extent where there are similar legislations governing similar cases 
referred to in this decretal law.

Article (3) 
Cases of Netting  
Netting includes the following cases:  
1. Termination, liquidation and/or acceleration of any payment, obligation to deliver 
entitlement or obligation to make, receive or require payments or deliveries, under a Qualified Financial Contract entered into under a Netting Agreement or to which a Netting Agreement applies;  
2. Calculation, estimation, or adoption according to an index of a close -out or termination 
value, market value, liquidation value, replacement value or any other relevant value –  
including the value of any damages, which may arise from a party's failure to enter into 
or perform a transaction required to be entered into under or pursuant to provisions of a 
Netting Agreement of the kind as referred to in this decretal law –  in respect of each Decretal Federal Law No (10) of 2018, Regarding Netting  5 
 obligation or entitlement or group of obligations or entitle ments terminated, liquidated 
and/or accelerated under item (1) of this article;  
3. Conversion of any values calculated or estimated under item (2) of this article into a 
single currency;  
4. Determination of the net balance of the values calculated under item (2)  of this article, as 
converted under item (3) of this article, whether by operation of set -off, offset, or net out 
of obligations or otherwise; and  
5. Entry by the parties into a transaction pursuant to or by virtue of which such a net 
balance becomes payable  directly or as part of the consideration for a specific asset or 
the provision for the payment of damages relating to any non - performance of any such 
transaction.

Article (4) 
Cases of Netting Agreement  
1. An agreement is considered a Netting Agreement in any of the following cases:  
a. Any agreement between two Parties that provides for Netting of present or future 
payment or delivery obligations or entitlements or obligations, or entitlement to make, receive or require payment or delivery, arising under or in  connection with one or 
more Qualified Financial Contracts entered into under such agreement by the parties to the agreement referred to as a "Master Netting Agreement";  
b. Any master agreement between two parties that provides for Netting of the amounts 
due under two or more Master Netting Agreements;  
c. Any Collateral Arrangement such as credit support annexes or credit support deed 
related to or forming part of one or more of the foregoing agreement referred to in 
paragraphs (a) and (b) of this article; and  
d. Any agreement or arrangement in accordance with Shari'ah rules, with a view to having similar purposes as any Netting Agreements or arrangement referred to in paragraphs (a), (b), and (c) of this article.  
e. If it includes agreements, contracts or transaction s, which fall within the framework of 
Qualified Financial Contracts referred to in article (5) of this decretal law.  Decretal Federal Law No (10) of 2018, Regarding Netting  6 
 2. Any arrangement shall be deemed to be a Collateral Arrangement if it includes 
agreements, contracts or transactions that fall within the fr amework Qualified Financial 
Contracts referred to in article (5) of this decretal law or within the definition of Netting Agreements referred to in this article.  
3. Any Netting Agreement and all Qualified Financial Contracts to which such netting 
agreement applies shall constitute a single agreement.  
4. A "Netting Agreement" shall include "Multi- Branch Netting Agreement"; however, the 
provisions of the Multi- Branch Netting Agreement referred to in this decretal law shall be 
enforceable on the Foreign Party's Bran ch/Agency, in case of its separate insolvency.

Article (5)  
Qualified Financial Contracts  
Without prejudice to provisions of article (7) of this decretal law Qualified Financial Contracts 
shall be final and enforceable and shall include the following:  
1. All types of swaps in relation to currencies, interest rate, basis rate, or commodities;  
2. Foreign exchange, securities, or commodities transactions, whether spot, future, forward 
or other such transactions;  
3. A cap, collar or floor transaction;  
4. A forward rate ag reement;  
5. A currency or interest rate future;  
6. A currency or interest rate option;  
7. Equity derivatives, such as an equity or equity index swap, equity forward, equity option or equity index option;  
8. A derivative relating to bonds or other debt securities or to  a bond or debt security index, 
such as a total return swap, index swap, forward, option or index option;  
9. A credit derivative, such as a credit default swap, credit default basket swap, total return 
swap or credit default option;  
10. An energy derivative, such  as an electricity derivative, oil derivative, coal derivative or 
gas derivative;  
11. A weather derivative, such as a weather swap or weather option;  Decretal Federal Law No (10) of 2018, Regarding Netting  7 
 12. A bandwidth derivative;  
13. A freight derivative;  
14. An emissions derivative, such as emissions allowance or emissions reduction 
transaction;  
15. An economic statistics derivative, such as an inflation derivative;  
16. A property index derivative;  
17. A securities contract, including (a margin loan and an agreement to buy, sell, borrow or 
lend securities), such as a securitie s repurchase or reverse repurchase agreement, a 
securities lending agreement or a securities buy/sell back agreement, including any such 
contract or agreement relating to a loan based on mortgage loans, interests in mortgage 
loans or mortgage related secur ities;  
18. A commodities related contract, including agreements (to buy, sell, borrow or lend 
commodities), such as a commodities repurchase or reverse repurchase agreement, a 
commodities lending agreement or a commodities buy/sell back agreement;  
19. A collateral arrangement;  
20. An agreement to clear or settle securities transactions or to act as a depository for securities;  
21. Any agreement, contract or transaction similar to any agreement, contract or transaction referred to in items (1) to (20) of this article, with respect to one or more reference items or indices relating to interest rates, currencies, commodities, energy products, electricity, 
equities, weather, bonds and other debt instruments, precious metals, quantitative 
measures associated with an occurrence, extent of an occurrence, or contingency 
associated with a financial, commercial or economic consequence, or economic or 
financial indices or measures of economic or financial risk or value;  
22. Any derivative such as swap, forward, option, contract for differe nces or other derivative 
in respect of, or combination of, one or more agreements or contracts referred to in items 
(1) to (21) and item (23) of this article; and  
23. Any Shari'ah -compliant contract or undertaking, which individually or together with any 
other  such contract or undertaking has or is entered into with a view to having an 
economic effect similar to any instrument of a kind described in any of items (1) to (22) Decretal Federal Law No (10) of 2018, Regarding Netting  8 
 of this article – including a murabaha contract, musawama contract, master 
collateralize d Murabaha agreement, restricted and unrestricted wakala agreement, 
alternative profit rate swap, alternative cross currency swap, alternative foreign 
exchange forward, other alternative hedging and investment instruments, arboun principle, or unilateral w a'ad and single wa'ad.

Article (6)  
Obligations Arising from Qualified Financial Contracts  
The following shall be established pursuant to Qualified Financial Contracts, whether they are entered into or incurred at a certain time or within a certain period  of time and whether or 
not subject to any condition or contingency, pursuant to which:  
1. Payment or delivery obligations are due to be performed or title to commodities or 
assets is to be transferred for consideration or  
2. Obligation to make payments or deliv eries, or to transfer title to commodities or assets 
for consideration.

Article (7) 
Committee for Designation of Qualified Financial Contracts  
A committee named the 'Committee for Designation of Qualified Financial Contracts' shall be 
formed in the Minis try by a resolution from the Minister, chaired by a representative of the 
Ministry and includes in its membership two (2) representatives of each of the Regulatory 
Authority in the State. The Committee shall have the following terms of reference:  
1. Provide o pinion on topics related to Qualified Financial Contracts;  
2. Designate any additional financial agreement, contract or transaction as a Qualified Financial Contract;  
3. Remove or add any financial agreement, contract or transaction from the list of Qualified Financial Contracts referred to in article (5) of this decretal law;  
4. Replace any financial agreement, contract or transaction in the list of Qualified Financial 
Contracts referred to in article (5) of this decretal law with any another financial 
agreement,  contract or transaction; or  Decretal Federal Law No (10) of 2018, Regarding Netting  9 
 5. Any other functions designated by the Cabinet.  
The resolution shall specify the mechanism for discharge of the Committee's functions.

Article (8)  
Enforceability of Qualified Financial Contracts  
All Qualified Financial Contrac ts in accordance with the provisions of this decretal law shall 
not be void, unenforceable, or not final for any reason related to aleatory contracts ( Gharar ) 
provisions referred to in the Civil Transactions law.

Article (9)  
Enforceability of Netting Agreements  
Netting Agreements shall be final and enforceable in accordance with their terms, including 
against an Insolvent, a guarantor, or any other Person providing security for any party to this 
agreement, even if this Person becomes Insolvent. The execution of a Netting Agreement shall 
not be suspended or stopped or otherwise impose conditions on its execution based on:  
1. The appointment of, or any application for the appointment of a Liquidator or any action of the Liquidator;  
2. Any other provision of law  relating to Insolvency and Bankruptcy Procedures; or  
3. Any other provision of law that may be applicable to an Insolvent.

Article (10)  
Enforceability of Netting during Insolvency and Bankruptcy Proceedings  
During Insolvency and Bankruptcy Proceedings relating to a party to a Netting Agreement, the obligations of any party to make payments or deliveries, which pursuant to that agreement 
are converted into net claims or obligations or otherwise netted – including through entry by 
the parties into a trans action of the kind referred to in item (5) of the definition of Netting 
referred to in article (3) of this decretal law –  shall take effect, in accordance with the terms 
of the applicable Netting Agreement.  
The same applies to Qualified Financial Contracts and to financial contracts and transactions Decretal Federal Law No (10) of 2018, Regarding Netting  10 
 to which such Netting Agreement applies.

Article (11)  
Scope of Powers of the Liquidator  
Without prejudice to the provisions of the registered owner and beneficial owner referred to 
in the legislations issued within the jurisdiction of the Regulatory Authorities in the State, any 
powers of the Liquidator to perform or not to perform specific contracts or obligations, 
transactions or claims will not prevent the term ination, liquidation, acceleration and/or 
conversion into net claims or obligations of all payment or delivery obligations or 
entitlements, and all obligations or entitlements relating to the making of payments or 
deliveries in accordance with the provisio ns of one or more Qualified Financial Contracts 
entered into under a Netting Agreement or to which a Netting Agreement applies.  
Any of such powers shall apply only to the net amount due in respect of all of such Qualified Financial Contracts in accordance with the terms therein.

Article (12)  
Limits on Application of the Provisions of the Insolvency and Bankruptcy 
Laws Prohibiting Set -off, Offset or Net Out of Obligations  
The provisions of a Netting Agreement, which provide for the determination of a net b alance 
of the close -out values, shall be enforced in respect of an Insolvent and any other party in 
accordance with its terms. The same shall apply in respect of market values, liquidation values and replacement values calculated in respect of accelerated and/or terminated payment or delivery obligations or entitlements under one or more Qualified Financial Contract entered 
into under or in connection with a Netting Agreement.  
The provisions of a Netting Agreement shall not be suspended, resolved, made cond itional or 
not performed in any manner based on the provisions of the Insolvency and Bankruptcy laws 
in force, which limit the exercise of rights to set -off, offset or net out obligations, entitlements, 
payment amounts or termination values owed between an  Insolvent and another party.  
  Decretal Federal Law No (10) of 2018, Regarding Netting  11

Article (13)  
Preferences and Fraudulent Transfers  
1. The Liquidator shall not annul, stop or refuse the performance of any of the following 
operations, on the grounds of it constituting a preference due to a non -Insolvent:  
a. any payment, transfer, delivery, substitution or exchange of cash, Collateral or any other interests, property, asset, or financial instruments, both conventional and 
Shari'ah -compliant, under or in connection with a Netting Agreement made from the 
Insolve nt party to the non - Insolvent party;  
b. any obligations incurred under or in connection with a Netting Agreement by the 
Insolvent and owing to the non -Insolvent to make any payment, transfer, delivery, 
substitution or exchange of cash, Collateral or any othe r interest or property; or  
c. any transaction entered into by the Insolvent in accordance with the terms of any 
Netting Agreement in order to give effect to the netting provisions of this agreement.  
2. As an exemption to the provisions of item (1) of this article, the Liquidator may have the 
right to annul or stop or refuse the performance of the operations mentioned in it, where 
there is clear and convincing evidence that the non -Insolvent party made such operations 
with the intention to hinder, delay, or defrau d any party to which the Insolvent party was 
indebted or became indebted, during or after the date such operations were made.

Article (14)  
Prohibition to Limit, Suspend, or Delay Application of Provisions of Netting 
Agreements  
No limit, suspend, or delay  application of otherwise enforceable provisions of a Netting 
Agreement in accordance with articles nos. (9) and (10) of this decretal law under the 
proceeding of stay or any other similar proceeding or order.

Article (15)  
Realization and Liquidation of Collateral  
The realization, appropriation and/or liquidation of collateral shall take effect or occur Decretal Federal Law No (10) of 2018, Regarding Netting  12 
 without any requirement that prior notice shall be given to, or consent be received from, any 
party, Person or entity, provided that:  
1. There is no agreemen t between the parties otherwise and  
2. Legislations in force in the State requiring that the realization, appropriation and/or liquidation of collateral is conducted in a commercially reasonable manner shall be 
taken into consideration.

Article (16)  
Enforce ability of a Multi- Branch Netting Agreement in an Insolvency of a 
Foreign Party's Branch/Agency  
1. The liability of a Foreign Party's Branch/Agency, in case of insolvency, or the liability of its Liquidator in the State under a Multi- Branch Netting Agreement shall be calculated as of 
the date of the termination of the Qualified Financial Contracts entered into under such 
Multi- Branch Netting Agreement in accordance with the terms of this agreement. The non -
Insolvent's right to receive payments shall be limited  to the lesser of either (i) the Foreign 
Party Net Payment Obligation or (ii) the Foreign Party's Branch/Agency Net Payment 
Obligation.  
2. The liability referred to in item (1) of this article otherwise paid to or received by the non -
Insolvent shall be reduce d by any amount in respect of the Foreign Party Net Payment 
Obligation pursuant to such Multi- Branch Netting Agreement, which if added to the 
liability of the liquidator would exceed the Foreign Party Net Payment Obligation, under this article.  
3. The liability of the liquidator of an Insolvent branch or agency of a Foreign Party to the non -
Insolvent under a Multi- Branch Netting Agreement shall be reduced by the fair market 
value of, or the amount of any proceeds of, Collateral that secures or supports the 
obligations of the Foreign Party under the Multi- Branch Netting Agreement and has been 
applied to satisfy the obligations of the Foreign Party pursuant to the Multi- Branch Netting 
Agreement to the non -Insolvent.  
4. The Foreign Party's rights to receive payment based on payments made in accordance with 
its Insolvency and Bankruptcy Proceedings in other jurisdictions shall be limited as follows:  Decretal Federal Law No (10) of 2018, Regarding Netting  13 
 a. The liability of the non-  Insolvent shall be reduced by any amount otherwise paid to or 
received by the Liquidator  or any other liquidator or receiver of the Foreign Party in its 
Home Country or any other country in respect of the Foreign Party Net Payment 
Entitlement pursuant to such Multi- Branch Netting Agreement, which if added to the 
liability of the non -Insolvent  under this article would exceed the Foreign Party Net 
Payment Entitlement.  
b. The liability of the non- Insolvent to the Liquidator pursuant to such Multi- Branch 
Netting Agreement also shall be reduced by the fair market value of, or the amount of 
any proceed s of the Collateral that secures or supports the obligations of the Non-
Insolvent and has been applied to satisfy the obligations of the non -Insolvent to the 
Foreign Party pursuant to such Multi- Branch Netting Agreement.  
5. The non -Insolvent to a Multi- Branch  Netting Agreement which has a perfected security 
interest in Collateral, or other valid title, lien or security interest enforceable against third 
parties pursuant to such Multi- Branch Netting Agreement, may retain all such Collateral 
and upon termination  of such agreement in accordance with its terms apply such 
Collateral in satisfaction of any claims secured by the Collateral, provided that the total amount so applied to such claims shall in no event exceed the Foreign Party Net Payment 
Obligation, if an y. Any excess Collateral shall be returned.

Article (17)  
General Provisions  
1. A Foreign Party's Branch/Agency Net Payment Entitlement shall be the amount that would have been owed by the non -Insolvent Party, if any, to a Foreign Party, under a Multi- Branch 
Netting Agreement, after Netting that Qualified Financial Contract entered into by the non -
Insolvent with the branch or agency of the Foreign Party, which takes place in the State 
under such an agreement.  
2. A Foreign Party's Branch/Agency Net Payment Obligat ion shall be the amount that would 
have been owed by the Foreign Party, if any, to the non- Insolvent, under a Multi- Branch 
Netting Agreement, after Netting those Qualified Financial Contracts entered into by the non -Insolvent with the branch or agency of t he Foreign Party, which takes place in the State Decretal Federal Law No (10) of 2018, Regarding Netting  14 
 under such an agreement.  
3. A Foreign Party Net Payment Entitlement shall be the aggregate amount owed by the non -
Insolvent – including all its subsidiaries and affiliates, if any, to the Foreign Party. This sh all 
apply after giving effect to the Netting provisions of a Multi- Branch Netting Agreement 
with respect to all Qualified Financial Contracts subject to Netting under such agreement 
– or the aggregate amounts that would be owed if the relevant Multi- Branch  Netting 
Agreement provided for any payments to either party, upon termination of Qualified 
Financial Contracts thereunder, under such agreement.  
4. A Foreign Party Net Payment Obligation shall be the aggregate amount owed by the Foreign Party – including all its subsidiaries and affiliates to the non -Insolvent after giving 
effect to the Netting provisions of a Multi- Branch Netting Agreement with respect to all 
Qualified Financial Contracts subject to netting under such agreement.

Article (18)  
Conflict with Other Laws  
Any provisions of any other law contrary to or conflicting with the provisions of this decretal law shall be cancelled.

Article (19)  
Decretal Law Publication and Application  
This decretal law shall be published in the Official Gazette, and shall come into force one month following the date of its publication.  
  
 Khalifa Bin Zayed Al Nahyan  
President of the United Arab Emirates  
  
Promulgated by us at the Presidential Palace, Abu Dhabi on:  
Muharram 10, 1440 Hijri  
September 20, 2018 Gregorian