Charities and fund-raising in Dubai new regulations

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1 Charities and fund-raising in Dubai new regulations 1 Briefing note July 2015 Charities and fund-raising in Dubai new regulations When considering undertaking acts of charity and fund-raising in the United Arab Emirates (UAE), it is important that individuals and corporate entities are mindful of the fact that such activities are heavily regulated. On 27 April 2015, a new decree was issued in the Emirate of Dubai (Decree No 9 of 2015) which expands upon existing restrictions and prohibits any collection of donations or advertising of fund-raising campaigns without prior written approval from the Islamic Affairs and Charitable Activities Department (IACAD). With a growing need for corporations to include more public welfare and corporate social responsibility work as part of their business model, this briefing sets out how the new regulations might impact on corporate entities and individuals in Dubai intending to undertake fund-raising activities. Background Charities and fund-raising in the UAE are regulated by the Federal Ministry of Social Affairs (MoSA) and its Emirates counterparts. In Dubai, the competent authority is IACAD. This briefing considers only the position in Dubai; fund-raising laws in other Emirates may differ. The applicable laws in the UAE (as applicable in the Emirate of Dubai) are as follows: Federal Resolution No 8 of 1974 concerning Conditions for Licensing Societies for Public Benefits in Collecting Money (Federal Fund-raising Law) Federal Cabinet Resolution No 1 of 1977 concerning the Regulation of Work and Social Affairs (Federal Social Affairs Law) Federal Law No 2 of 2008 concerning Public Welfare Associations and Organisations (Federal Charity Law) Dubai Law No 2 of 2011 on the Department of Islamic Affairs and Charitable Activities (IACAD Law) Dubai Law No 13 of 2011 on Organising Economic Activities in the Emirate of Dubai (Dubai Economic Activities Law) Dubai Executive Resolution No 26 of 2013 concerning Charities, Quran Memorisation Centres and Islamic Foundations in the Emirate of Dubai (Dubai Charity Law). Key things to know: Corporations and individuals cannot fundraise for donations without prior approval The prohibition includes 'allowing' fund-raising which may impact employers if their employees breach the law The law applies to free zones and international charities abroad Requirements for approval are extensive and licenses are only likely to be approved if in conjunction with a registered charity Penalties are high, including imprisonment and fines. Decree No 9 of 2015 on the Organisation of Fund-raising in the Emirate of Dubai (Dubai Fund-raising Law)

2 2 Charities and fund-raising in Dubai new regulations The Federal Fund-raising Law expressly prohibits any association from raising money from any natural or corporate persons inside or outside the UAE without first obtaining a licence. To obtain such a licence, an association must be registered and the term of each licence shall be three months (no more than two licences shall be granted each year).the IACAD Law further prohibits anyone from collecting donations or permitting third parties to collect donations in the Emirate of Dubai without obtaining prior approval from IACAD and prohibits any person or group of persons from engaging in the activities of any charitable organisation without first obtaining a licence. The Dubai Fund-raising Law provides further clarification of the licensing process for fund-raising activities (including the advertising of fund-raising activities) in Dubai, and sets out exemptions and penalties for breaches of the law, which carry both financial and criminal liabilities. The requirements for licensing applications are lengthy and all fund-raising activities have to be conducted via a licensed charitable organisation, of which there are currently only 19 in Dubai (as listed on the IACAD website). Some frequently asked questions Set out below are our initial responses to some frequently asked questions on charities and fund-raising in the Emirate of Dubai. What is a charity? The definition of a charity under the Dubai Charity Law is 'any sole proprietorship or a group of an organisation entitled to continue for a definite or indefinite period, comprising of natural or legal persons, is concerned with religious or charitable affairs and engages its activity within the Emirate, including religious or charitable foundations and associations established or to be established by law or decree'. As such, a charity can be established by a person, a group or a corporation. The Federal Charity Law provides a more expansive description for 'public welfare associations' which are 'any organised group... for the purpose of achieving social, religious, cultural, scientific, educational, professional, feminist, creative or artistic activity, providing humanitarian services, achieving benevolent aim or achieving its activities without attaining material benefits'. What licences are required to establish a charity? Article 6 of the Dubai Economic Activities Law states that any natural or legal person intending to conduct any economic activity in Dubai (which includes commerce, trade and providing a service) has to obtain a licence from the Department of Economic Development (DED). We understand that, if such an entity wishes to conduct charitable activities, they will be required to obtain an additional licence from IACAD, and if they wish to fundraise for donations they will also have to obtain a fund-raising licence from IACAD. What can a charity do? There are no clear provisions relating to what a charity can do or what will constitute 'charitable activities'. According to the IACAD Law, charitable activities are overseen by IACAD and include: 'religious and charitable activities' List of charities registered in Dubai* Mohamed bin Rashid Charitable Humanitarian Foundation Al Maktoum Foundation Dar Al Ber Society Dubai Charity Association Beit Al Khair Society Al Shifa Charity Establishment DIB Foundation Dubai Foundation for Woman and Children Emaar Foundation Red Crescent (Dubai) Al Barakah Charitable Society Easa Saleh Al Gurg Charity Foundation Mohammad Omar Bin Haider Charity Establishment Noor Dubai Foundation Dubai Care Emirates Airline Foundation Trahim Foundation Majid Al Futtaim Charity Foundation Khalaf Ahmad Al Habtoor Foundation *This list was obtained from y.aspx?menuid=186 as at 10 June 2015.

3 Charities and fund-raising in Dubai new regulations 3 'the collection of donations, in cash and in kind, and dispose of the same for human aid, orphan sponsorship, building mosques and any other type of aid' 'relief campaigns and charitable events' 'programs and projects launched by the charitable organisations either inside or outside the UAE'. What are registered charities? A registered charity is one which is licensed and recorded on the register maintained by IACAD (pursuant to Article 6 (e) of the Dubai Charity Law) or MoSA (pursuant to the Federal Social Affairs Law). Examples of registered charities are set out above. What is a donation? The term 'donation', under the Dubai Fund-raising Law, refers to 'money given by the donator as a voluntary act, for the purpose of assistance and charitable activity, including Zakat and alms'. The Dubai Fund-raising Law does not preclude private and corporate donations (see 'How else can individuals and corporations donate to charity' below), as long as individuals and corporations are not soliciting donations via fund-raising activities without prior approval from IACAD. How does the new rule affect donations to charity? Article 3 of the Dubai Fund-raising Law further clarifies the Federal Fund-raising Law and prohibits fund-raising or allowing fund-raising without written approval from the relevant authorities. The new law therefore does not change the current position on fund-raising for charities, which is further affirmed in Article 7 of the IACAD Law. However, it clarifies and expands the position in certain areas, such as expressly prohibiting the advertisement of fund-raising activities, whether in audio, visual or print media. The Dubai Fund-raising Law does not prohibit individual or corporate donations to charities. It is interesting to note that, while the Federal Fund-raising Law specifically prohibits public welfare associations from fundraising, the Dubai Fund-raising Law merely refers to 'fund-raising' and 'donations collected in whatever way and for whatever purpose', which could be construed more widely to include non-charitable organisations such as schools. Do donations include items or do they only relate to money? While the law only makes reference to donations as a monetary contribution and not items, we understand that IACAD views donations to include both money and non-monetary items as they have value attached to them, such as clothes, toiletries and bedding. Are there exceptions to the prohibition? The Dubai Fund-raising Law clarifies that certain entities are exempt from the law and permitted to collect donations without applying for approval. This includes members of the Federal and Dubai Government and government entities (Article 3(b) of the Dubai Fund-raising Law). Fund-raising which is exempt also includes 'donations launched by the initiatives of His Highness the President of the State, his Deputy, members of the Federal Supreme Council and their Crown Princes and Deputies', as well as 'donations collected by the government entities' and 'any other entity determined by the Director General [of IACAD] in accordance with the public interest requirements'. How do you obtain approval and/or a licence to raise funds for a charity? The application process for fund-raising activities, as we understand, is extensive, and there are no clear provisions governing measures for approval. In addition to a standard form, the applicant must also prepare documents detailing the following: purpose of fund-raising names of person(s) authorised for fund-raising

4 4 Charities and fund-raising in Dubai new regulations location(s) of fund-raising method of fund-raising suggested period of fund-raising the entity to which the donations will be sent specification of the amount to be collected any other data determined by the Department [IACAD]. (Article 6 of the Dubai Fund-raising Law) According to the Federal Fund-raising Law, approval for fund-raising may only be granted to a licensed charity (Article 2 of the Federal Fund-raising Law), although a registered charity may not necessarily have approval to fundraise immediately (Article 1 of the Federal Fund-raising Law). The Federal Charity Law also provides that 'donations may only be collected through associations registered pursuant to the provisions of this law and upon a prior license from the Ministry [of Social Affairs]'. In Dubai, we note that fund-raising licences are likely to be granted only to charities registered with IACAD. What is the timeframe for obtaining a licence? According to Article 5 of the Dubai Fund-raising Law, IACAD has 15 days from the time of submission to issue a decision. Notably, however, if no decision has been issued within that time period, the application is considered to have been rejected. Does this law apply to fund-raising activities for offshore/international charities? The Law applies to any donations raised within Dubai, and therefore by extension it affects donations raised in Dubai for international charities or non-governmental organisations outside of the UAE (Article 2 of the Dubai Fund-raising Law). We also understand that IACAD approval would likely only be granted to or for a licensed charity in Dubai, and it is unclear whether a recognisable international charity may be able to obtain a licence to conduct its activities or to fundraise onshore in the UAE. Does this law apply to corporations or charities licensed in a free zone? Similar to the response above, it is expressly made clear that the Law applies to special development zones and other free zones, including the Dubai International Financial Centre (DIFC) (Article 2 of the Dubai Fund-raising Law). However, nonprofit organisations registered in the DIFC or the International Humanitarian City (IHC), are generally not listed on the official IACAD or MoSA lists as registered charities. The IHC Authority is able to license any humanitarian institution (which undertakes any humanitarian, charitable, environmental or other activity related to rescue work) or any non-profit organisation (NPO Establishment) pursuant to the IHC Law and its general Rules and Regulations (IHC Rules). However, these establishments can only undertake their activities within the free zone itself unless they obtain the necessary licences onshore (Clause of the IHC Rules). On fund-raising activities, there is an express clause requiring approval from both the IHC Authority and from IACAD (Clause 13.2 of the IHC Rules). We understand from the IHC Authority that they will accept applications from international charities wishing to establish a branch in the free zone and that the Authority will act as a liaison between registered entities and government bodies in Dubai - including IACAD- in order to obtain licences. The situation is less clear for non-profit incorporated organisations (NPIOs) in the DIFC. NPIOs are not treated as charities in the conventional sense. However, they appear to be allowed to receive donations pursuant to Article 19 (a) of the NPIO Law. The DIFC laws and regulations otherwise do not refer to the process of obtaining a fund-raising licence or whether one is obtainable through the DIFC. We understand that where DIFC law is silent, onshore laws will apply.

5 Charities and fund-raising in Dubai new regulations 5 Can you raise funds for an unregistered charity in Dubai? We understand that the requisite approval to raise funds is likely only to be granted for licensed charities. As mentioned above, there are currently 19 registered charities in Dubai (listed on the IACAD website). Can an individual or a corporation which is not a registered charity solicit donations from private donors? The various Federal and Dubai laws referred to above expressly prohibit any natural persons or corporations from engaging in the activities of a charitable organisation without first obtaining a licence from the relevant authority. Even a charitable organisation with a licence from the DED must also obtain approval from IACAD. Any individuals or corporations found breaching the provisions of the law would be subject to the penalties set out below. We note that those intending to fundraise by hosting events or selling items would also require approval from IACAD. What are the penalties for breaching this law? Illegal fund-raising invites both criminal and civil sanctions (including imprisonment of up to a year and not less than a month), with a monetary fine (between AED5,000 and AED100,000) (Article 10 of the Dubai Fund-raising Law). In addition, bank accounts holding illegal donation moneys can be frozen, and donations can be seized and disposed of by IACAD (Article 9 of the Dubai Fund-raising Law). Further, violators may be reported to their regulators, such as the DED or the Dubai Legal Affairs Department, and have their licences revoked, or be required to return twice the amount of funds raised, and the place where the funds were raised can be closed for up to one year (Article 13 of the Dubai Fund-raising Law). How else can individuals or corporations donate to charity? Importantly, the Dubai Fund-raising Law does not prohibit the private act of donating to charity. Individuals can donate money and items in their own private capacity to any licensed charity, or international organisations, so long as they do not solicit donations from other individuals. Corporations can also make donations from their own corporate funds, as long as they do not raise funds from amongst their employees (for example by asking for donations by ), or externally (such as soliciting donations from clients). How do these rules compare with fund-raising regulations in other GCC countries? We note that the UAE's laws on charities and fund-raising are similar to regulations in other Gulf Cooperation Council (GCC) countries. In Saudi Arabia, for example, charitable fund-raising, as an independent activity, is governed by the Fund-raising for Charitable Purposes Regulations These regulations require all persons undertaking or intending to undertake charitable fund-raising activities to obtain permission from the Ministry of Social Affairs of Saudi Arabia. The Ministry of Social Affairs is the regulatory authority responsible for overseeing fund-raising activities generally. Further, there are various policies and procedures established to govern the accounts of charitable and welfare institutions in line with anti-money laundering and counter-terrorism financing laws. The Saudi Arabian Monetary Agency issued a circular in 2003 requiring that all deposits into charity bank accounts be identified and verified. A National Commission for Relief and Charity Work Abroad has also been established to regulate the charitable activities of registered charities which are conducted outside of Saudi Arabia, and charitable funds are not permitted to be sent abroad without government approval.

6 6 Charities and fund-raising in Dubai new regulations Key CSR Contacts Robin Abraham Managing Partner Middle East Mohammed Al-Shukairy Partner Mohamed Hamra-Krouha Partner Antony Single Partner E: robin.abraham E: mo.al-shukairy E: mohamed.hamra-krouha E: antony.single Gavin Goodwin General Manager Middle East Anna Rimmington Regional Head of K&I Middle East Shamim Khan Professional Support Lawyer E: gavin.goodwin E: anna.rimmington E: shamim.khan This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. This briefing is based on unofficial English translations provided by third party external providers. There are no official English translations of UAE laws. In the event of a conflict between the English text and the original Arabic text; the UAE courts would treat the Arabic version as definitive. Clifford Chance, Level 15, Burj Daman, Dubai International Financial Centre, P.O. Box 9380, Dubai, United Arab Emirates Clifford Chance 2015 Clifford Chance LLP is a limited liability partnership registered in England and Wales under number OC Registered office: 10 Upper Bank Street, London, E14 5JJ. We use the word 'partner' to refer to a member of Clifford Chance LLP, or an employee or consultant with equivalent standing and qualifications. Licensed by the DFSA. Abu Dhabi Amsterdam Bangkok Barcelona Beijing Brussels Bucharest Casablanca Doha Dubai Düsseldorf Frankfurt Hong Kong Istanbul Jakarta* Kyiv London Luxembourg Madrid Milan Moscow Munich New York Paris Perth Prague Riyadh Rome São Paulo Seoul Shanghai Singapore Sydney Tokyo Warsaw Washington, D.C. *Linda Widyati & Partners in association with Clifford Chance.