A recent Dubai court ruling ordered a company to pay an ex-employee outstanding dues in UAE currency as well as in crypto. The ruling has raised questions about whether the UAE now allows salaries to be paid in cryptocurrencies.
Speaking with the Managing Partner of the UAE law firm, Wasel & Wasel, Cryptopolitan learns that the court ruling is a recognition of the specific terms agreed upon in the contract rather than a broader validation of crypto as a currency within the UAE’s legal framework.
The dispute centred on the failure to pay EcoWatt
The dispute centred on the defendant’s failure to pay the EcoWatt token portion of the plaintiff’s salary for six months and the alleged wrongful termination of their employment. The court ruled in favour of the employee, not only recognizing the validity of payment in cryptocurrency but also ordering the payment to be made in EcoWatt tokens rather than converting it into fiat currency.
The court recognized and enforced that crypto was a valid form of remuneration, despite the traditional payment norms that typically involve fiat currencies. The court’s decision in 2024 was based on the principle that wages are a right of the employee for the work agreed upon.
The court noted that as per Article 912 of the Civil Transactions Law, wages are a right of the worker against the employer in return for the agreed work and the provisions of Article 22 of Federal Decree-Law No. (33) of 2021 on the Regulation of Labour Relations and Article 16 of the Cabinet Resolution No. 1 of 2022 concerning the Executive Regulations of this Decree-Law provide that the employer is obligated to determine the amount and type of wage in the employment contract, and if not, the court shall determine it.
The Wasel & Wasel law firm was the first to publish the story in Lexology. Cryptopolitan spoke with Mahmoud Abuwasel to understand the implications of this ruling more.
UAE court ruling does not put crypto on par with fiat currency
According to Abuwasel, the judgement does not imply that crypto is on par with fiat currency. He notes, “It only confirms that an employment contract stipulating payment in crypto is enforceable. The judgment is a recognition of the specific terms agreed upon in the contract rather than a broader validation of crypto as a currency within the UAE’s legal framework.
According to Abuwasel, the court is simply upholding the terms agreed upon by both parties in the contracts. Abuwasel explains just as in the case of employment contracts that specify salaries in foreign currencies, the court is upholding the contract where the employer agreed to pay part of the employee’s compensation in crypto.
Salary payment versus salary benefit
Some experts have noted that the UAE court differentiated between salary payments and salary benefits, and as such, the crypto that was considered in this judgement was seen as a benefit.
Abuwasel explains, “The term ‘salary benefit’ might be a misnomer in this context. The ruling does not imply that cryptocurrency is merely a benefit or an add-on to the salary—it is part of the agreed-upon compensation. In this specific ruling, the court upheld the payment of a portion of the employee’s compensation in cryptocurrency, as explicitly outlined in the employment contract.”
Accordingly, Abuwasel explains that the court directly acknowledged the validity of the contract terms, including the cryptocurrency payment. He adds, “Thus, the distinction between ‘salary’ and ‘salary benefit’ is largely semantic and doesn’t alter the legal enforceability of the compensation terms as agreed upon by the employer and employee.”
UAE courts view stablecoins as valid salary payments
Moving from crypto payments to stablecoin payments for salaries might be easier especially after the UAE Central Bank recently came out with its Payment Token regulation that allows the usage of UAE Dirham stablecoins as a legal tender within the UAE.
Abuwasel explains, “With regards to stablecoins, in Dubai Primary Court judgment no. 1365/2023, the court looked into a USDT dispute. The court did not specifically address the legal status of stablecoins or provide any direct commentary on their regulation or classification. The ruling focused on the enforcement of a claim involving USDT in a fraudulent transaction.”
However, he adds, “The court ordered the compensation of the equivalent AED amount involved in the transaction, but it did not delve into broader regulatory or legal principles concerning stablecoins themselves.”
The court emphasized the enforceability of the claim based on the value in AED rather than the cryptocurrency itself.
Abuwasel notes, “The claimant initially sought recovery based on a conversion rate that valued the USDT at AED 366,000. However, interestingly, the court applied the actual conversion rate at the time of the transaction similar to that of the USD and ordered the payment of AED 365,934 not 366,000.”
As such, even in 2023, stablecoins were treated as any other currency, and the claim was enforced after the USDT was valued based on its conversion rate to USD.
The future of crypto in the UAE
With the new Payment Token regulation from the Central Bank of UAE and soon after Tether’s announcement that it would be launching an AED stablecoin in the country, the courts in the UAE have already upheld several claims related to crypto and stablecoins.
Gabriel Khoury, a crypto lawyer in the UAE, in an interview with DubaiOne TV commented on the future, “It is about recognizing parties are free to mention what they want in the employment contract. Yet crypto is not a legal tender but a step forward.”
He adds, “The more people are accepting crypto and blockchain, the more it will be considered as normal. The Payment Token regulation is new, transition period of one year, we will see how this will be implemented.”
He sees this as a significant ruling, especially since some previous decisions did not even mention crypto. However, this judgement is relevant as it will pave the way for future developments in the crypto community.
Source: https://www.cryptopolitan.com/uae-crypto-recognition-not-crypto-validation/