The new legislation extends both the protections offered to consumers, as well as the obligations applicable to online retailers.
With the recent implementation of a new consumer protection law, the UAE has taken a big step forward in protecting consumer rights. The new legislation – Federal Law No. (15) of 2020 (the new CPL) – entered into force on November 16, 2020, repealing Federal Law No. (24) of 2006. In particular, the new CPL extends to the both the protections offered to consumers, as well as the obligations applicable to online merchants.
A notable provision of the new CPL is Article 4, paragraph 5, which obliges entities (as defined below) to protect “the privacy and security of consumer data”. Article 4 (5) also implies that entities must not use consumer data for “promotional or marketing purposes”.
Read in isolation, this provision could be interpreted as prohibiting the use of consumers’ personal data for promotional and marketing purposes in the United Arab Emirates – in particular given the significant penalties provided for in the new CPL in the event of non-compliance, including jail terms, fines, and the closure of the business concerned. While a complete ban on the use of consumers’ personal data for marketing purposes is unlikely to be the intention of the new CPL, the legislation includes a number of general provisions that deserve attention and analysis.
This article answers five key questions about what the new Powerline means for providers and consumers.
1. Which entities and activities are subject to the New CPL?
The New CPL applies to the following providers and persons (collectively, the Entities), in accordance with Article 3:
- Service providers who offer a service or manufacture, distribute, market, sell, supply, export, import or play a role in the production, trade or storage of a good to a consumer
- A legal person advertising a product or service
- Commercial agents
- United Arab Emirates Registered E-Commerce Providers
The new CPL applies to all services and products in the UAE (including free zones). Under the new CPL, “commodity” means “any natural substance or industrial, agricultural, animal, manufactured, intellectual or technological product, including the primary elements of the substances and the components that go into that product”.
2. When is compliance required?
The new CPL provides a one-year grace period for entities to ensure compliance. Based on the release date of November 16, 2020, the grace period will expire on November 15, 2021.
3. What are the main provisions of the New CPL for retailers and e-commerce providers?
As indicated in the introduction, Article 4 (5) of the new CPL introduces a consumer right relating to data protection and security. Article 4, paragraph 5, can be read as prohibiting the use of personal data for promotional and marketing purposes.
Article 36 of the New CPL provides that the implementing regulations must be published within six months of the publication of the New CPL, i.e. no later than May 15, 2021. This regulation will probably clarify the application of the Article 4, paragraph 5, of the New CPL.
According to Article 25 of the new CPL, e-commerce providers registered in the United Arab Emirates are required to provide consumers and competent authorities with their names, legal status, address, contact details of the licensing authority and other information. sufficient in Arabic (as well as details of specifications, contractual conditions, payment and guarantees) with regard to their services / products.
Additional consumer rights
In particular, the New CPL also offers consumers the right to:
- To be educated and to have an increased awareness of their rights and obligations (Article 4, paragraph 3)
- Receive “fair and prompt resolution” of consumer disputes (Article 4, paragraph 7)
- Receive “fair compensation” for damage caused to consumers or their goods as a result of the purchase or use of the product or the receipt of services (Article 4 (8))
- Have contracts that they conclude with suppliers covering repair, maintenance or after-sales services, or the return, replacement or reimbursement of the goods (article 15)
4. What penalties does the new CPL impose in the event of non-compliance?
Articles 28 to 32 of the new CPL specify the penalties for infringement. Financial penalties fall into two categories:
- Violations of certain provisions of the new CPL (for example, false advertising, which can result in imprisonment of up to two years and a fine of at least AED 10,000 and up to AED 2 million, or ‘one of the above sanctions)
- Violations of certain provisions of the new CPL (for example, contracts not translated into Arabic, which can lead to a prison sentence of up to six months and a fine of at least AED 3,000 and up to 200,000 AED, or one of the above sanctions)
The penalties referred to above may be doubled following a repeated infraction.
In addition, article 31 of the new CPL specifies that a court can administer the following sanctions after a conviction:
- Confiscation or destruction of the merchandise (and the materials and tools used to produce the merchandise)
- Closure of the store or place where the crime was committed for a maximum of three months
- Publication of the sentence in two local dailies
5. What will happen next?
The executive regulations are expected by May 15, 2021. Latham will continue to monitor and provide updates on related developments, including once the executive regulations are available, additional guidance and / or ministerial decisions become available.
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