Federal Decree-Law No. 25 of 2025 (the “New CTL”) regulates, in Part Three thereof, Contracts of Work, including the Contract of Receivership set forth in Chapter Five of that Part, in Articles 931 to 945. The legislator has made certain amendments to the relevant articles that appeared in Federal Law No. 5 of 1985 (the “Old CTL”). This article addresses the most significant of these amendments, with analysis as follows:
1. Amendment to the Definition of the Contract of Receivership and Refinement of Its Drafting
The purpose of the Contract of Receivership is to safeguard disputed property and administer it until the right thereto is established. Accordingly, the drafting of the definition in the New CTL was refined in Article 931, emphasizing that the dispute is an attribute attached to the property and not to the parties disputing over it. This differs from the definition in the Old CTL, which, in Article 997, focused on the existence of two parties disputing over property who entrust it to another for its safekeeping and administration and return of its yield until the right thereto is established. Furthermore, the person who undertakes the safekeeping and administration of the property has been designated as the “Custodian”. Thus, the refinement of the definition from a drafting perspective was consistent with the provisions of this contract.
2. Expansion of the Court’s Authority to Appoint a Custodian over the Property
The New CTL added a new paragraph in Article 933 providing that the court may appoint a Custodian over the property in cases provided for in the Law itself. This includes situations where the parties to the dispute do not agree on the person of the Custodian who shall undertake the Receivership, safekeeping, and administration of the property. This is in addition to the cases provided for in Article 934 relating to Endowment (Waqf) property. The purpose of this amendment is to confirm the legal basis for the court’s jurisdiction and authority to appoint a Custodian over the property in cases included in the Law.
3. Judicial Receivership over Endowment (Waqf) Property as the Sole Remedy in Certain Legally Defined Cases
Article 934 of the New CTL addressed the cases in which Judicial Receivership may be imposed over Endowment (Waqf) property, which are consistent with the cases previously set forth in the Old CTL. These include: where the Endowment (Waqf) is vacant or a dispute arises among its administrators, or where an action is brought to dismiss the administrator. Also included are cases where the Endowment (Waqf) itself is indebted, or where one of the beneficiaries is an insolvent or bankrupt debtor. In such cases, Receivership may be imposed in two situations: first, over the beneficiary’s share alone if it can be segregated; and second, over the entire Endowment (Waqf) if segregation of the beneficiary’s share is not possible—this is done to protect the rights of creditors.
However, the New CTL stipulated at the end of paragraph (3) of the aforementioned Article that Judicial Receivership in both situations shall be the sole remedy for preventing the loss of creditors’ rights by reason of the Endowment (Waqf) administrator’s mismanagement. This means that if any remedy is available from the interested parties that guarantees the creditors’ rights and avoids the administrator’s mismanagement (if any), then Judicial Receivership shall not be resorted to in these two situations.
4. Imposition of New Obligations on the Custodian
The New CTL added new obligations on the Custodian who undertakes the administration and safekeeping of the property in accordance with the rules of Receivership, pursuant to paragraphs (2) and (3) of Article 938 of the New CTL. The Custodian is prohibited from substituting another in performing all or part of his tasks without the consent of the persons concerned or permission from the court. Furthermore, the Custodian is obligated to maintain regular records documenting the tasks assigned to him in safeguarding and administering the property and accounting for its yield, so that such records may be easily referred to upon termination of the Receivership and to preserve rights. This amendment will reduce issues related to the extent of the Custodian’s performance of his tasks or the calculation of the yield of the disputed property upon termination of the Receivership.
5. Implied Waiver of the Custodian’s Remuneration
The New CTL included an addition relating to the Custodian’s implied waiver of his remuneration for the Receivership if such implied waiver can be inferred from the relevant facts and circumstances. In accordance with general rules, the competent court has broad discretion in interpreting and assessing such circumstances and facts to ascertain the existence of an implied waiver. An example of this would be where the Custodian returns the property subject to Receivership and its yield to the person whose right thereto is established, or to a person agreed upon by the persons concerned, or to a person appointed by the court, without claiming his remuneration and without the existence of an excuse or impediment preventing such claim.
6. Amendment to the Cases of Termination of Receivership
Under the Old CTL, the cases of termination of Receivership were: completion of the work, agreement of the persons concerned, or issuance of a judgment by the court. However, the New CTL deleted the case of “completion of the work,” on the basis that Receivership constitutes an assignment either from the persons concerned or from the court, and therefore does not terminate merely by completion of the work.
Accordingly, a new case was added which are, termination of Receivership upon expiry of its term if it is of specified duration. The cases of termination by agreement of the persons concerned or by order of the court were retained. This amendment is logical and consistent with expanding the scope of contractual agreements and applying the principle of party autonomy. Thus, if the Receivership is of specified duration—which is legally permissible—it shall terminate upon the expiry of that duration.
It should be noted that the cases of termination of Receivership do not include the death of the Custodian, because the death of the Custodian does not terminate the Receivership. Rather, the court shall appoint another Custodian upon the request of either party of those concerned with the disputed property to continue the performance of the task, as detailed in Article 944 of the New CTL.
Key Contacts
Dr. Omar Al Azawe, Of Counsel, o.alazawe@tamimi.com
Youssef Mobasher, Paralegal, Y.Mobasher@tamimi.com