The UAE’s New Digital Law for Payments and Transactions

The UAE’s New Digital Law, enacted in 2023, aims to regulate e-commerce activities, enhance consumer protection, and promote digital innovation. By introducing specific licensing requirements, emphasizing data privacy and cybersecurity, and recognizing the validity of electronic signatures, the law strengthens the country’s digital landscape, fostering a secure and dynamic environment for online trade and transactions.

By Giulia Interesse

In September 2023, the United Arab Emirates (UAE) enacted the Federal Decree No. (14) of 2023 (hereinafter, “New Digital Law”), a legislative framework designed to oversee and strengthen e-commerce activities across the country.

The New Digital Law supersedes the Federal Decree by Law No. 46 of 2021 on Electronic Transactions and Trust Services (hereinafter, “2021 Law”). While the 2021 Law ensured the secure use of electronic documents and digital signatures, the New Digital Law expands its reach. It now regulates online payments and offers greater protection for consumers. This applies not just to domestic online transactions, but also to UAE residents buying goods from international sellers online.

In this article, we explore the key changes brought about by the New Digital Law, analyzing implications for both consumers and businesses in the evolving landscape of e-commerce within the UAE.

Overview of the New Digital Law

Definitions and scope of application

The New Digital Law applies to “individuals engaged in any form of trading by modern technological means” within the UAE, as well as to goods acquired from abroad.

Specifically, the scope of the New Digital Law encompasses the following:

• Trading through modern technological means: This includes not only the core activities involved in trading through digital platforms but also the various tools and technologies utilized in facilitating such transactions.
• Commercial activities: It applies to individuals or entities engaging in commercial endeavors through modern technological means, whether operating within the State or accessing such means from external sources. This includes a broad spectrum of activities, ranging from online retail to digital service provision.
• Logistics services and digital payment gateways: The scope extends to ancillary services directly associated with trading through modern technological means, such as logistics support for product delivery and digital payment gateways facilitating secure financial transactions.
• Free zones: Under specific circumstances, the New Digital Law applies to transactions occurring within free zones. This includes scenarios where goods and services are procured through modern technological means outside the geographical boundaries of the free zone or in the absence of regulatory frameworks governing such transactions within the free zone.
• Financial free zones: The law also extends to financial free zones, albeit with certain limitations.

Despite its broad applicability, there are certain exceptions:

• Government procurement: Activities related to government procurement fall outside the purview of this New Digital Law.
• Non-commercial usage of technological means: The law does not apply to the use of data, platforms, and smart applications for non-commercial purposes through modern technological means.
• Digital currencies under Central Bank supervision: Digital currencies designated for payment and trading purposes, under the supervision of the Central Bank, are exempt from the provisions of this Decree-Law.
• Transactions by licensed financial institutions and insurance companies: Transactions conducted by licensed financial institutions and insurance companies, subject to the Central Bank’s oversight, regarding various regulatory aspects such as standards, consumer rights protection, dispute resolution, and supervision, are not governed by the New Digital Law.

Objectives

The New Digital Law is driven by several objectives aimed at fostering innovation, facilitating e-commerce growth, and ensuring consumer protection in the digital realm.

1. Supporting innovation: At the core of the legislation is the goal of fostering an innovative e-commerce landscape. By providing clear guidelines and reducing regulatory barriers, the law encourages businesses to explore new technologies, business models, and online services. This supportive environment fosters innovation, enabling the UAE to maintain its position at the forefront of digital advancements.
2. Facilitating e-commerce growth: The law is designed to nurture a robust and dynamic e-commerce sector. By setting clear guidelines and standards for online trade, it aims to create an environment conducive to the growth and success of e-commerce businesses, ranging from startups to established online retailers and service providers.
3. Ensuring consumer protection in digital payments: Recognizing the importance of consumer confidence in the digital age, the law places a strong emphasis on safeguarding consumer rights. Transparent regulations around online transactions are established to build trust between consumers and e-commerce platforms. This includes guidelines on advertisement practices and delineating consumer rights in electronic transactions, ultimately enhancing consumer trust and encouraging more individuals to embrace online shopping.
4. Promoting fair trading practices: The New Digital Law sets a standard and criteria for businesses that trade using modern technological means. It ensures that digital merchants provide logistics services in a transparent manner, facilitating smooth transactions for consumers. Additionally, clear payment terms and obligations are outlined, ensuring fairness in transactions and preventing the imposition of unnecessary charges on consumers regarding digital payments.

Key changes in the New Digital Law

The table below presents a comparative overview of the significant amendments introduced in the New Digital Law in contrast to the 2021 Law. It outlines the additional content incorporated and the expanded scope under the new legislation.

Licensing and regulatory compliance

The New Digital Law introduces specific licensing requirements for e-commerce entities, aiming to regulate the online marketplace and ensure compliance with UAE laws and regulations. The licensing process is streamlined to facilitate ease of doing business while upholding high operational standards.

This measure ensures that e-commerce platforms adhere to data privacy and cybersecurity regulations, promoting consumer trust and safeguarding online transactions.

Data privacy and cybersecurity

Concerning data privacy and cybersecurity, the New Digital Law emphasizes the importance of robust measures to protect consumer data and ensure secure online transactions. By implementing stringent data privacy and cybersecurity protocols, e-commerce businesses enhance consumer trust and bolster the credibility of online platforms. This creates a resilient e-commerce ecosystem that is adept at thwarting cyber threats.

Electronic signatures and records

Acknowledging the digital nature of e-commerce, the decree recognizes the validity and legal standing of electronic signatures and records. This provision modernizes the legal framework for online transactions, facilitating efficient and binding agreements between businesses and consumers electronically.

Aligning with global best practices, this provision supports the seamless execution of online contracts and transactions, ensuring that activities related to trading through modern technological means carry the same legal weight as traditional trading.

UAE’s booming digital landscape

The rise of digital payments and e-commerce in the UAE is reflected in recent statistics, indicating a significant increase in online transactions and mobile payment usage. The UAE’s impressive smartphone penetration rate, which stands among the highest globally, is evidenced by statistics showing smartphone penetration exceeding 80 percent of the population.

According to data from the Central Bank of the UAE, digital payment transactions have witnessed double-digit growth year-on-year in 2023, with mobile payment volumes experiencing a particularly steep rise.

Thus, the heart of the New Digital Law lies precisely in the UAE’s commitment to nurturing a robust and dynamic e-commerce sector. By setting clear guidelines and standards for online trade, the law aims to create a conducive environment for e-commerce businesses, ranging from burgeoning startups to established online retailers and electronic service providers.

Besides, by regulating e-commerce and transactions conducted through modern technological means, the New Digital Law contributes to enhancing the UAE’s digital economy at large, providing a solid legal foundation for online trade and boosts consumer confidence in digital transactions. This, in turn, has a high potential to stimulate economic growth, drive innovation, and attract investment in the digital sector.

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