News

Tuesday, January 24, 2017

The United Arab Emirates issued Anti-Commercial Fraud Law no. 19 in December 2016 in an effort to protect consumers and regulate the market. The Law, previously approved by the Federal National Council back in 2014, brings welcome improvements and positive enhancement to existing enforcement measures in the UAE and in particular with regards to increasing penalties imposed in relation to acts of commercial fraud.

The Law defines commercial fraud as the use and sale of a fraudulent commodity, which has been altered or manipulated in order to cause deception. As for counterfeit goods, they are defined in the Law as goods that bear a trademark that is identical or similar to a registered trademark. Although this definition limits the ability to use the Law as basis for taking action against look-a-like products, it nevertheless enables registered brand owners to take action against goods bearing similar marks, in addition to goods bearing identical marks.

Furthermore, the Law considers acts of Commercial Fraud to include the import, export, re-export, manufacture, sale, offer or possession for sale, storage, lease, marketing or trading with adulterated, spoilt, or counterfeit goods. The Law states that counterfeit goods will be destroyed as per the Implementing Regulations of the Law. Such provisions eliminate concerns of re-exportation of counterfeit goods by competent authorities and we await to see the positive impact that such provisions may have on current practices in the UAE with respect to re-export of goods seized by some custom authorities.

The Law includes provisions that allow authorities to demand commercial books and invoices from traders. This enables the authorities concerned to reveal the origins of the counterfeit goods and lead them to the source of such goods in the UAE markets. It is uncertain though whether brand owners would be allowed to obtain such information from the authorities.

The Law further refers to establishment of the Higher Committee for Combating Commercial Fraud, assisted by subcommittees on an Emirate level. The Committee is entrusted, among other duties, with developing strategies and policies of combating commercial fraud, studying obstacles experienced upon the enforcement of the Law and proposing a mechanism for handling such obstacles and issuing regulations for the activities of the subcommittees. This is a positive development and a way forward in an attempt to harmonize the implementation of the Law on a federal level. It remains to be seen whether the Committee would also work on harmonizing procedures before competent authorities in handling brand owners’ complaints against commercial fraud.

Another major development brought by the Law is the higher penalties for acts of counterfeiting. Brand owners have always demanded harsher penalties, especially in terms of fines imposed on counterfeiters and infringers. The Law details penalties imposed in relation to acts of commercial fraud which include imprisonment of up to two years and fines that reach up to 250,000 dirhams (US$68,500) or both, in addition to the destruction of the counterfeit goods. The Law provides for even higher fines that reach up to 1 million dirhams (US$274,000) if the counterfeit products relate to human foods, animal foods, medical drugs, and agricultural crops or organic foodstuffs. The Law also provides in certain circumstances additional penalties which include closure of the facility and cancellation of license.

We now await issuance of the Implementing Regulations to have clarity on any possible changes in the UAE IP Rights enforcement regime. At this stage, the Law is viewed as a positive development in the fight against acts of commercial fraud and offers a positive enhancement of the existing enforcement framework in the UAE and is expected to increase the effectiveness of enforcement mechanisms through the use of deterrent penalties.

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