In a groundbreaking decision, the Dubai Court of First Instance has ruled that crypto can be legally recognized as a valid form of salary payment under employment contracts.
This ruling, which emerged from case number 1739 of 2024, marks a significant shift in the United Arab Emirates’ legal stance on digital currencies.
Legal professionals, including Irina Heaver, a partner at UAE law firm NeosLegal, have praised the ruling as a “progressive approach” that aligns with the evolving nature of financial transactions in the Web3 economy.
Employment Dispute Open Door for Crypto Recognition
The legal battle that led to this landmark ruling centered around an employment dispute where the plaintiff, an employee, claimed unpaid wages, wrongful termination compensation, and other benefits.
The employment contract specified a monthly salary to be paid partly in fiat currency and partly in 5,250 EcoWatt tokens, a form of cryptocurrency.
Over six months, the employer failed to pay the cryptocurrency portion of the salary, prompting the employee to file a lawsuit.
In its 2024 ruling, the Dubai Court of First Instance sided with the employee, recognizing the validity of the cryptocurrency payment as outlined in the employment contract.
The court ordered the employer to fulfill the contractual obligation to pay the salary in EcoWatt tokens without requiring the conversion of the payment into fiat currency.
This decision marks a significant departure from the court’s earlier stance in a similar case in 2023, where the claim for cryptocurrency wages was denied due to the lack of a straightforward method for valuing the tokens.
Irina Heaver noted, commenting on the ruling,
“This decision reflects a broader acceptance of cryptocurrency in employment contracts and highlights the court’s recognition of the evolving nature of financial transactions within the Web3 economy.”
She further noted that the ruling is a crucial acknowledgment of how value is created and shared in the Web3 space, where it is common for employees to be compensated in a combination of fiat and project tokens.
Dubai Officially Ruled Crypto as a Means of Value
In 2023, the Dubai Court addressed a similar case involving including EcoWatt tokens in an employment contract.
While the court acknowledged that the contract included payment in cryptocurrency, it ultimately ruled against the employee’s claim because the plaintiff failed to provide a clear and reliable method for converting the cryptocurrency into fiat currency.
The court stated,
“It is established according to the Court of Cassation, that determining the employment relationship, its start, duration, and the resulting effects falls under the authority of the trial court. As the claimant did not provide evidence of the value of the digital currency, the court disregards it.”
However, the 2024 ruling demonstrated a significant shift in the court’s earliest approach.
This time, the court recognized cryptocurrency’s validity as a form of payment and enforced the payment of the agreed-upon salary in EcoWatt tokens without requiring conversion to fiat.
The court’s decision was grounded in Article 912 of the UAE Civil Transactions Law, which states that wages are a worker’s right against the employer and that the employer must pay wages on due dates.
The court ruled,
“As the respondent did not provide evidence of payment in EcoWatt tokens, the court orders the respondent to pay the claimant the value of her wages in EcoWatt tokens.”
The court’s decision is expected to encourage further integration of digital currencies in everyday financial transactions in the UAE, potentially paving the way for broader adoption of cryptocurrencies in various sectors.
With over 3,000 cryptocurrency companies operating in the UAE and employing tens of thousands of people, this ruling provides employees a much-needed layer of protection.
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